Home insurance — what do you need to know?
Keeping this real, buying a house is the biggest deal you will ever make. Unless you have inherited a large cash sum or have saved carefully over the years, there will be a mortgage contract hanging around your financial neck for years. That means you should go out of your way to find the building that’s right for you as a place to live and will represent a reasonable investment. Then, as the years go by, you will furnish the building to create your home. As the number of personal possessions mounts, your sense of home will grow. Yet, it only takes one accident to start a fire or a major weather event like a tornado and both home and contents have disappeared. This just leaves you with the mortgage debt. That’s why every mortgage contract contains a clause mandating a home insurance policy. It makes sense because you can rebuild your home and still offer security for the loan.
So what exactly is a home insurance policy for? The answer may not be quite what you expect. It has nothing to do with the resale value of the building. The intention is to rebuild and replace the contents. In almost every case, this means you will be insuring for more than the market value of the property. You start off with reputable local builders and ask for estimates of the cost of rebuilding from the ground up (insuring condos is a different calculation because you only have an interest in a part of the whole building). This should not be hypothetical. The builders need to see your home to give reliable figures. If, for example, you have an old building, it may be expensive to recreate the look and feel given the latest building codes. Equally, it may cost more if there are gold-plated faucets and other high-end fittings. Now walk through your home, room by room, and make a rough list of all your possessions. For valuation purposes, you are looking to replace like-for-like. Home insurance does not allow you to profit by buying new furniture for old.
When you have a reasonably reliable figure for rebuilding and replacement, get as many home insurance quotes as possible. There can be significant differences in the premium rates and savings to be made.
More About Home Insurance
Home insurance should be mandatory just like auto insurance. Accidents affecting the home are as common as traffic accidents. Home insurance keeps a roof over your head
If your home insurance is not sufficient to cover the cost of rebuilding, this could be very expensive for you. Review your home insurance policy every year