Over the past few months you’ve probably heard some news about rising interest rates and wondered if that will prevent you from selling your home and moving to a new location. HomeLight notes in their Top Agent Insights for Summer 2022 report that 66% of real estate agents report that homeowners are still getting multiple offers per property, and no agents are concerned about a real estate crash.
Many real estate agents believe the housing market will remain strong because there’s a large demand for homes and limited inventory. Additionally only 35% of agents report seeing buyers drop out of the market permanently.
As a homeowner, regardless of if you’re thinking of putting your home on the market or are staying put, it’s essential to understand your homeowners insurance policy. Although these policies may seem impossible to understand unless you’re an expert, when you have the right mindset and the tips in this article, you can understand the essentials of your policy.
What is homeowners insurance
Homeowners insurance is a type of insurance that protects your home, possessions, and which shields you from personal liability if an accident occurs. In fact, this is important enough that most banks and lenders require buyers to have homeowners insurance through the duration of their mortgage Even if you don’t have a mortgage, a homeowners insurance policy is relatively cheap compared to covering damages from catastrophe.
What does homeowner insurance cover?
The core of most homeowners insurance policies is dwelling protection which protects the home and structure. If the physical structure of your home is compromised, such as due to a natural disaster or accident (e.g. a kitchen fire) the policy will cover the cost to repair the damage. Most policies require you to insure at least 80% of the home’s replacement value.
The second major component of homeowners insurance policies is personal property coverage. This covers the replacement or repair of belongings in your home. For example if a kitchen fire damages your appliances, this coverage will kick in and help you with those costs. Personal property coverage is generally 50% to 70% of the home’s insured amount.
Personal liability protection provides protection against lawsuits from bodily injuries or property damage that you, a family member, or pet may cause. For example if your mail carrier slips on your walkway (due to it not being up to code) and files a lawsuit, the policy will cover your legal costs and compensation (if applicable) up to the policy limits.
The final major area of coverage in homeowners insurance policies is loss of use coverage. This covers living expenses if you need to move temporarily due to property damage. For example, if a tree branch hits your home during a hurricane and takes out part of your roof, loss of use coverage will cover the cost of alternative accommodations while your home is repaired.
Keep in mind that loss of use coverage often is only 20% to 30% of the home’s insured value and there may be limits on the duration of the claim coverage. For example, the policy may only cover costs for up to a year.
So now you have the basics of choosing a homeowners insurance policy. If you have any further questions, you can always consult an insurance broker to help you navigate policies.