How Insurance Can Protect Your Home
You are buying a house or maybe even thinking about it, you’re most likely hearing a lot about insurance and that you need it. There are so many kinds and you’re not even sure which ones do what and if you need them all.
Car insurance was a breeze, there’s only the one kind — it’s either going to fix the car you run into or that car and yours, too (basically), with home-related insurance, there are a lot of strange specialties, and other things that aren’t quite insurance, but act like insurance.
How will you know which you need to protect your home and which ones are just a waste of your money? Let us walk you through it.
Homeowner’s Policies 101: Insurance for Your House and Your Things
If you rented a house before you bought, you may have had a light version of this policy, often called a renter’s policy. These policies are to cover your things, should the house burn down, or a tornado take it away. Renter’s policies are relatively inexpensive, running about $15 a month in most areas, so more landlords are making them mandatory parts of rental agreements. You’ll see a few similarities between your renter’s policies of the past and a homeowner’s policy.
The homeowner’s policy is designed to protect you, your family, your dwelling and your personal property from damage, both physical and financial, to some extent. Most policies are essentially the same, containing these components:
Dwelling coverage. Your lender will require that if your property is severely damaged, it’s able to recover the amount of the loan you’ve borrowed. This is what dwelling coverage is for, when it comes down to it. In the case that your house was a total loss, you’d have the option to either rebuild with those insurance funds or give them to the bank and own the lot free and clear.
And, it gets better! Dwelling coverage will also cover major damage to your home, like when a bad wind or hail storm comes through and causes your roof to spring a leak (especially here in Colorado). You will likely have a deductible around $1,000 or higher to deter you from making too many claims, and it is handy to have when big issues pop up.
It’s extremely important to note that while many acts of nature are covered by your dwelling coverage, most policies specifically exclude floods, earthquakes and sinkholes. Check your policy carefully and ask your agent about additional coverage if you’re in a flood-, quake- or sinkhole-prone area.
Other structure coverage. Other structure coverage does exactly what it says it does: covers other structures. There’s usually a dollar cap, which is a percentage of the value of your home, but it can be applied to major damage to sheds, detached garages, fences, greenhouses and any other permanent structure you have on your property. This is what Cheryl likely had to use to get her new “she shed” in the State Farm commercial.
Personal property coverage. If your property is damaged during a storm, stolen during a robbery or severely damaged by something out of your control, you can file a claim and possibly have reimbursement. Replacement cost coverage provides the amount necessary to replace your items, so if this is an option, choose it. There probably is not coverage for flooding, earthquakes or sinkholes, so be ready to ask about it.
Personal liability coverage. If the neighbor pops by to borrow a cup of sugar and accidentally slips and is injured, you don’t have to worry about how much her hospital bills are going to be. Your insurance will cover it (to a specified dollar amount). The same applies if your tree drops a limb on the neighbor’s roof and they sue you for the costs. Accidents happen, that’s what insurance is for.
Other things that are covered by this part of the policy may include dog bites that occur on your property, if you were honest with the agent and your dog wasn’t on a prohibited dog list (some insurance companies won’t insure homes with “bully” type dogs, German shepherd, rottweilers, and others). It’s essentially a general liability policy tied to your home, so if you can imagine an accident stemming from your family, it’ll probably cover it.
Loss of use coverage. Many homeowner policies will also pay for you to live elsewhere while your home is being repaired after major damage. This is the loss of use coverage portion of the policy. It, of course, comes with a cap, so don’t get too cozy at the Ritz. Your dollars — and days — are limited.
Additional Coverage. You can choose from several additional coverages, from extra coverage for valuable collectables (like great aunt Mildred’s vintage tea set) to coverage for identity fraud, at an additional cost. Most of these extra coverages won’t apply to most buyers, and there’s one that you may want to consider if you’re buying a house with a basement or in an area with a high-water table like a lot of west Arvada.
That’s the “Water Backup and Sump Pump Discharge or Overflow” coverage. Now, this still won’t cover flooding, but it will cover any water that’s forced back into your house through the sewer system due to excessive ground- or wastewater causing backflow in the sewage system. So, it’s not for flood waters that enter your house the normal way, but if they come in through the sump pump, you are covered.
If you’re in an area where this is a possibility and the coverage isn’t much extra, get this. The sheer nightmare that is water backup from a basement drain due to oversaturation is unspeakable and the smell unforgettable. You’re going to be happy to leave that one to the pros.
Seller Provided a Home Warranty, How Does This Figure In?
Getting a home warranty at closing is a good move. Although the companies behind them can sometimes be slow to get the wheels moving, they can protect you from major repair expenses in your early homeownership years. They can also be a little confusing because they sort of work like insurance, even though they aren’t technically insurance.
Home warranties help you cover the cost of repairs for common small household issues, like leaky plumbing, air conditioning hiccups and electrical shenanigans. You pay a portion of the cost of the service call, depending on what level of plan was purchased, and the warranty company pays the rest.
Everyone pays into one big pot and the money is used where it’s needed. Not everyone will need to use their home warranty, and those people who do need it may require a considerably larger portion than they contribute. Everybody understands that’s the deal when they sign up, though. They know they may not actually use the coverage, so it’s all on the up-and-up.
Wrap Your Home in a Warm Layer of Insurance Bubble Wrap
Some home buyers and homeowners think that insurance is a waste of money. After all, it’s designed so that you never use it. While that may be true, the fact remains that if you do need it, you’re really going to need it and there’s no take-backs. You can’t change your mind and load up on coverage after that giant tree has fallen through your bathroom ceiling.
For the relatively small cost (when compared to your house payment) of the right insurance coverages, it’s nice to be able to sleep at night without having to worry about what you’ll do if water comes in under the front door from the storm that’s brewing. Getting good insurance is a snap, too.
You can ask the Absolute Home Group to recommend an agent we know a few!