One of the major questions you need to ask yourself before buying a new home is: "how much homeowners insurance do I need?" There is no one general answer to this question, as it depends on the type of home you buy, its location, and several other factors.
Here's a more in-depth look at how much
homeowners insurance you would need.
Different Types of Homeowners Insurance
The first step to resolving the puzzle on how much insurance you need is to decide if a standard policy is sufficient, as although it covers a lot, it has its limits. This policy generally covers certain disasters such as storm damage to your home, but it doesn't cover all natural disasters. Flooding or earthquake damage, for example, requires special coverage to be added to your standard plan.
Much of your decision depends on the location of your home. For example, if you move into a known flood zone, it's critical to get flood insurance. Never assume that the standard homeowners plan covers every disaster imaginable as it doesn't. If your home is in an area with no history of major natural disasters, you may be able to get by with just a standard plan.
Standard plans generally cover liability, which involves damage caused by you, your family members, or your pets to other people's properties. It's a way of protecting yourself from litigation in case you accidentally cause injury to someone. A greater coverage can be achieved with an umbrella or excess liability plan.
Additional Living Expenses
If you are forced out of your home for a while due to a disaster, you may have to stay in a hotel, wherein your standard plan will cover your expenses. This feature, which ensures you'll be reimbursed for temporary living expenses, including food costs, is called Additional Living Expenses (ALE). It will also cover income losses if you rent a room to a tenant as you await the rebuilding of your home.
ALE coverage, like other elements of a standard policy, has limits that vary from one insurance agency to another. Some companies pay an unlimited amount of coverage but for a limited time frame, while others have tighter limits. ALE coverage, however, can be increased with an additional premium.
Estimating Rebuilding Costs
Another element you need to consider when choosing your
homeowners insurance is the cost of rebuilding your home, provided it is damaged by environmental factors beyond your control. These costs are based on a list of factors such as availability of building materials, exterior wall construction, number of bathrooms, and style of your home. Charges will be much higher for custom-built homes and for improvements to be made to your existing structure.
Local construction costs and the size of your home will also affect the rebuilding costs. The need to upgrade your home to meet modern local building codes will result in higher costs than the original structure. Costs may also be affected by hard-to-replace materials and features.
Protecting Valuable Possessions
Your standard plan will pay for replacing much of your belongings if they are stolen or damaged to an extent, but certain items will require additional coverage. For example, expensive jewelry might need extra coverage since your standard plan is likely to be limited to items worth less than $2,000. Similarly, a high-end computer may also require additional coverage.
The key to protecting expensive possessions is to take inventory of all your valuable items and submit the list to your insurer before a disaster occurs. Ask your insurance agent if your basic plan covers all items or if you need to buy more insurance.
Buying a new home can be fun and exciting, but you should also be aware of your
homeowners insurance needs, which would vary depending on multiple factors.
To learn more about how much
homeowners insurance you need, contact the experts at
Club Agency Insurance Brokerage in Garden City, New York today. We are here to assist you with all your coverage needs.
