Buying your first house is hard work. You crunched the numbers, saved your downpayment, and are ready to start touring Brighton homes for sale.  But are you ready?  Have you thought about homeowners insurance?  Homeowners insurance ranks at the top of the home-buying checklist along with mortgage pre-approval and deciding between a lakefront home or downtown condo.  Consider these things about homeowners insurance coverage to avoid unpleasant surprises down the road.

What's the Big Deal About Homeowners Insurance?

When you finance your home with a mortgage lender, homeowners insurance will more than likely be required to protect it from damage caused by unforeseen circumstances like fire and theft.  It may also help cover costs if you accidentally damage another person's property or if someone is injured at your home.

How It Works

One of the first decisions you'll need to make about homeowners insurance is how to pay the premium: out of your escrow account or on your own. In exchange for that premium, the insurance company agrees to pay for repairs or replacement of the property if damage occurs that your policy covers. After you pay your deductible, the homeowners' insurance policy determines the amount your insurance covers. Lenders will require you to have homeowner's insurance, but you'll need it for protection even if you purchase your home outright with cash.

Most policies consist of property coverage and liability coverage. You may need higher limits or additional coverage depending on your situation.

Property Coverage

This part covers damage to your house. It also includes damage to permanently attached structures and unattached structures that are on your property.

Property coverage also includes damage to your personal belongings. The limits are usually between 40 and 75 percent of the value of your home. There are per item limits too, so expensive items may not be fully covered.

Personal property loss is covered in one of three ways.

1. Actual cash value – how much your belongings are worth minus depreciation.
2. Replacement cost – how much it costs to replace your belongings without depreciation up to the limit of your policy.
3. Guaranteed replacement cost – the cost to replace your belongings without depreciation up around 20% over the limit of your policy.

Liability Coverage

Liability covers injuries to others and damage to their personal property that occur in your home or on your property. If you're sued as a result of that damage or injury, it would also pay for your lawyer and legal fees as outlined in the policy.                                                                       

What Is and Isn't Covered

Most policies try to cover a wide range of possible damage, and the big stuff like fire, severe weather damage, damage from vehicles or aircraft and water damage due to burst pipes should always be included. But it's important to note the wording in your policy and the specific exclusions. The most common exclusions are floods and earthquakes. Additional insurance must be purchased if needed for those situations. Here are a few other things that aren't covered as standard.

• Intentional damage
• Damage or replacement of sewer or utility lines that run outside your house
• Earth movement
• Maintenance or general wear
• Neglect
• Damage resulting from war
• Drain or sewer back up
• Additional rebuilding or repair costs to upgrade an older home to current construction standards

When You May Need Additional Coverage

In addition to flood and earthquakes, these situations may require higher limits or additional insurance.

• Expensive items such as collectibles, musical instruments, artwork, furs, jewelry, or custom furnishings
• You have a high net worth
• You would have higher than normal living expenses if your home is temporarily uninhabitable.
• Historic homes

The right insurance helps protect your home and your finances in case the worst happens. Make sure to read your coverage carefully and ask for clarification on anything you don't understand before signing the contract.

Our REALTORS® can help make sure you find the best home for you and your family. Contact Griffith Realty when you're ready to start your home search.