If it’s your first time buying a house, getting a good home insurance policy should be on top of your list. Since you haven’t done this before, you’re at a loss and do not know where to start. What should you do? 

The first thing you need to do is talk to your insurance agent. If you do not have one yet, ask for suggestions from your mortgage lender. Then you have to find time to sit down, talk, and ask questions about getting home and property insurance. 

Asking questions is easy, but asking the right ones is often difficult. If you have no idea or aren’t sure what to ask, you might not get the information you need. You can always go ahead and get a policy, but keep in mind that doing so without planning and studying options can give you problems in the long run. 

Here are ten questions homeowners usually ask about home insurance policies. The answers will help determine if you’re choosing the right provider or not. 

1. What is home insurance, and what does a standard policy cover? 

A home or homeowners insurance is a type of property and casualty insurance. It protects your home and everything inside it in case of theft and disasters such as windstorms, lightning, hail, vehicle collision, explosion, vandalism, and fire. 

Homeowners who avail of the standard policy enjoy four coverage types. 

Personal property coverage protects all personal belongings found in the home. Dwelling coverage protects the home’s physical structure. Additional expenses coverage is for costs that surface when a homeowner is displaced from his home.   

Liability coverage is for instances when a household member causes bodily injury to another person. 

2. Does the law require all homeowners to get home insurance? 

There is no specific law that requires homeowners to get home insurance. However, it is a significant need when you’re investing in your home. Mortgage lenders usually ask you to have one first before continuing with any transaction. 

3. What are the different types of home insurance policies? 

Home insurance policies have two major types – actual cash value and replacement cost. Actual cash value home insurance policy covers your home and property cost. The claims are paid after the depreciation is deducted. If someone rents your home, your insurance company computes its actual cash value, and this amount is what the renter will pay. 

Replacement cost refers to the claims insurance companies pay after the expenses for repairing a damaged home is determined. It would consider the value of the property if it were sold as new today. If you bought your house for $100,000 and its current market value is $75,000, then that is its replacement cost. 

4. Do home insurance policies cover flooding and earthquakes? Do I have to purchase a flooding/earthquake insurance policy separately? 

Home insurance policies do not cover flooding and earthquakes. Homeowners who reside in flood and earthquake-prone areas are required by mortgage lenders to buy plans for both.    

5. Are all home insurance policies the same? 

Not all policies are the same. Although there are similarities in their standard policy, each insurance company has its program. There are even providers that offer customized plans. 

6. Please explain in detail what personal property coverage, liability insurance, and ALE or Additional Living Expense coverage are all about. 

Personal property coverage, liability insurance, and Additional Living Expense coverage all come with home insurance policies.   

If you have a home insurance policy, personal property coverage will protect your belongings when you lose them because of a fire or theft. Your appliances, clothing, and furniture are all protected. You can use the coverage to repair or replace the things you own that were damaged or lost in a fire or burglary.   

Liability insurance helps when a household member causes bodily harm or injury to another person or when some other homeowner’s property is damaged. The coverage takes care of the medical bills and legal costs. 

When your home is severely damaged, ALE coverage pays for whatever expenses you incur while temporarily living in a hotel or elsewhere. 

7. What is a policy limit? 

The highest amount the insurance company pays for a claim is known as a policy limit. It is determined by looking at your dwelling cost and dwelling coverage limit, among others. 

8. Will my home be inspected before I can get a policy? 

Insurance companies need to inspect your home to identify risks and determine the total value of your property. 

9. Are home insurance premiums paid separately? 

In most cases, home insurance premiums are already added to your mortgage. It’s still best to inquire from your provider as each company has its own process. 

10. Do I get a tax deduction for my home insurance policy? 

No, home insurance is not tax-deductible. Landlords who rent out building units and homeowners with business offices in their homes are some exceptions.

Asking these questions and getting the right answers from your provider will ensure that you’ll get the home insurance policy that best answers your needs.

Article provided by our guest writer:

Rachael Harper