Understanding Insurance Policies

Posted on: 28 December 2019

If you're buying your first home, it may be your first experience with buying property insurance. Insurance is required when you get a mortgage on a home, but even if you happen to be paying cash, you want insurance to protect your investment. Here's a look at some different kinds of insurance for you to consider.

The Amount Of Coverage You Can Get

You can buy a policy with different variables for your deductible and policy limit so you can get protection you can afford. You can also buy different types of policies that have different amounts of coverage and prices. For instance, a replacement cost policy pays to replace items destroyed or damaged by a covered peril. An actual cash value policy pays the actual value of the item. This type of policy costs less and it may be what you prefer if you have mainly used furniture and possessions that wouldn't cost a lot to replace with like items. An extended replacement cost provides the best protection for when your house is damaged. It pays for repairs to your house for a covered peril that may exceed the limit on your policy due to higher construction costs than when you took out the policy.

The Types Of Policies You Can Buy

You'll need basic homeowner's insurance, but you may need to add flood insurance or earthquake insurance too. If you live in a flood-prone area, flood insurance may be required by your lender, and this insurance isn't included in a general property insurance policy. In addition, you'll want liability insurance in case someone is hurt on your property. It's important you understand what each policy covers, especially when it's the first time you take out insurance and you're not familiar with how it works.

For instance, property insurance may pay for valuables damaged in a storm or by vandals, but it may not pay for food ruined in your freezer or refrigerator due to a power failure. You may also need to add riders to your policy for additional coverage, such as personal belongings that exceed the value limit in a general policy. You'll also want to know what's covered by storm, lightning, hail, and fire damage and if you need additional policies for any natural perils besides flood and earthquakes.

You'll want as much protection for your home as you can get so your home is protected against vandals and acts of nature. You'll pay more for great coverage, but you might be able to reduce your costs by doing things like installing smoke alarms, bundling insurance, and maintaining good credit. Another thing you'll want to know is how to use your property insurance when your home has had damage. You'll consider your deductible and whether it is worth it to file for a claim. You'll generally save claims for large financial expenses rather than small damage repairs you can afford to pay yourself.