Buying a House
Whether buying the mansion on the hill or a condominium, your insurance needs are sure to change. Make sure you don't forget to address some important insurance needs. In particular, review your home insurance, life insurance, disability insurance and auto insurance needs.
If you are like most people and have financed your home, the lender will require a minimum level of homeowners insurance. Even if you paid cash for your home, it's a good idea to protect your investment with a good homeowners insurance policy.
There are many different types of homeowners insurance coverage, but three of them are the most common. The first type is HO-1, which is basic coverage. HO-1 covers your home from specific perils such as fire, wind, lightning and theft. HO-2 also covers your home from specific perils, but it offers expanded coverage. HO-3 offers the most coverage. Unlike HO-1 and HO-2 policies which name only specific perils for which your home is covered, HO-3 policies cover all perils except for those that are specifically excluded. Other types of homeowners coverage include HO-4 to insure condominiums, HO-6 for renters insurance and HO-8 for old homes.
Home insurance policies provide specific types of coverage. You should make sure your home insurance policy has the following major coverage provisions:
Dwelling Coverage - This is the most important coverage because it covers your homes structure.
Personal Property Coverage - This covers any household valuables such as jewelry, personal possessions and furniture.
Liability Coverage - Provides protection if you are sued because someone is injured by your family or pet on or off your property.
In addition to the above-mentioned provisions, you should get a separate flood insurance policy because homeowners insurance policies do not cover damages caused by floods. Flood insurance is backed by the federal government and covers homes in more than 18,000 communities that have agreed to stricter zoning measures to control floods. The National Flood Insurance Program (NFIP) provides flood coverage through many insurance companies and the rates are all the same since they are set by the federal government.
If you are like most people and finance your home, you should consider obtaining life insurance to cover your mortgage. When you finance a home many mortgage companies will attempt to sell you life insurance to cover your mortgage; however, this coverage is often more expensive than buying an individual policy on you own. A level premium term life insurance policy is a good choice for affordable protection that lasts the length of your mortgage. These policies offer level premiums and protection for durations of 5 to 30 years. Make sure the policy you buy has guaranteed level premiums for the entire duration.
Disability insurance is one of the most important types of insurance because it protects your most valuable asset, your future earnings ability. Over your life you will earn hundreds of thousands of dollars unless you become disabled. If you financed your home you are responsible for making monthly payments to your lender, and you need to make sure you're protected in the event that you become disabled and have a loss of income. A good long-term disability policy will provide you with a sufficient income stream in the case that you are disabled. Check to see if you have adequate coverage through work, and if not, contact an agent to obtain an individual policy.
Once you buy a home, it's a good idea to review your auto insurance policy if the home will be your primary place of residence. Your auto insurance policy covers your car assuming it is kept at a specific location. If you move to a new home, you should notify your insurance company. Your rates may go up or down based on the location of your home. Also, you may want to consider obtaining your home and auto insurance coverage from the same insurance company since many companies offer discounts for multiple policies.