Homeowners insurance is a must because it covers the cost to repair, rebuild, or replace your new home or items in your home if it is damaged or destroyed. Typical policies also protect you with liability coverage against accidents in or on your new property. Homeowners insurance is required by a lender and is usually included in your monthly mortgage payment.
Clothing, furniture, appliances, and most of the other contents of your home are typically covered if they’re destroyed in an insured disaster. You can even get “off-premises” coverage, so you could file a claim for lost jewelry, say, no matter where in the world you lost it. If you own a lot of high-priced possessions (fine art or antiques, fine jewelry, designer clothes), you might want to pay extra to put them on an itemized schedule, purchase a rider to cover them, or even buy a separate policy.
Most homeowners don’t know that flood insurance is excluded from their policies. Flood insurance is also different from water backup protection. Ask your agent to go over the details with you.
Liability coverage protects you from lawsuits filed by others. This clause even includes your pets! So, if your dog bites your neighbor, Doris, no matter if the bite occurs at your place or hers, your insurer will pay her medical expenses.
Be sure to review in detail with your insurance agent what your policy does not cover!
3 Types of Coverage
Actual cash value covers the cost of the house plus the value of your belongings after deducting depreciation (i.e., how much the items are currently worth, not how much you paid for them which can be a substantial difference).
Replacement cost value policies cover the actual cash value of your home and possessions without the deduction for depreciation, so you would be able to repair or rebuild your home up to the original value.
Guaranteed (or extended) replacement cost/value is the most comprehensive coverage. This inflation-buffer policy pays for whatever it costs to repair or rebuild your home—even if it’s more than your policy limit.