Buying your first house is among the most exciting things you’ll ever do in life. Making this moment more extraordinary, buying a house often ties into other major life decisions you’ll make; including getting married, starting a family, or following through a long-term career opportunity. As exhilarating as it may be, it is often because of the emotional rush that first-time home buyers often find themselves overwhelmed by the options available to them throughout the home buying process.
The process of buying a home goes deeper than looking for the best property and finding a mortgage that fits your budget. It is crucial for the home buyer to make sure that their new investment is protected, covered, and secured. This is where home insurance comes in.
Is Home Insurance Necessary?
If you are purchasing a house with cash, a home insurance policy isn’t technically mandatory. However, as a first time home buyer you should know that nothing is more important than protecting your new purchased property.
If you are like most people, then your new house isn’t just your new home, it is also your largest investment. If on the other hand, you are taking out a loan in purchasing your new house, a home insurance policy will most likely be mandatory as the lender will want to insure the protection their investment requires.
What Does Home Insurance Cover?
Generally speaking, a standard home insurance policy covers the structure and the contents within it. It also covers other structures that sit on the property that may include the;
- tool or gardening shed
- home office
A good home insurance policy also covers additional living expenses if you have to temporarily move out of your home as the result of a claim.
Technically speaking, a standard home insurance coverage consists of several categories, including: building, liability, contents, additional living expenses and other structures on the property.
- Liability coverage covers potential medical fees and legal expenses that often result from injuries that happen on your property such as, a neighbor falling down your driveway.
- Building coverage protects the cost of rebuilding or repairing your home and will include any physical damage like a kitchen fire or pipe burst.
If your home gets damaged, there’s a good chance that some of the items inside it could get damaged as well. In these types of situations you will want to make sure you have ‘Replacement Cost Coverage’ for your damaged belongings. Replacement Cost Coverage will pay the full replacement value of your contents where an ‘Actual Cash Value’ policy factors in depreciation of your personal property leaving you with only partial coverage.
For more expensive items like diamond rings, you will want to make sure those items are scheduled on your homeowners policy or a Personal Article Floater in order to get the full replacement value in the event of a claim.
Additional Living Expense coverage typically covers food and lodging cost while your house is being repaired.
Other structures coverage protects additional structures on your property such as a garage, a home office, a workshop, etc.
How Much Does Home Insurance Cost?
Home insurance costs vary in the same way that home mortgages themselves do from each other. The cost of a home insurance policy largely depends on the amount of coverage you need. For instance, the home insurance policy for a house that’s valued at $2,000,000 would obviously have a different price than, say, a policy for $200,000 house.
Apart from your house, the contents within your home also commands the cost of your policy. For example, if your home accommodates priceless works of art, then you can expect to pay a more sizable premium for your policy.
On average, annual home insurance prices range from $850-$2,500. As these rates reflect the average home insurance cost, these numbers naturally take into account discounts that are enjoyed by the general population such as age-discounts, claims-free discounts, and even loyalty discounts.
If you are buying a house for the first time, it becomes more important to practice due diligence in researching your insurance options to get the right coverage for your home. Reach out to our expert agents to receive a QUOTE to insure the protection of your home or subscribe to the next blog post HERE.