So you’re taking the plunge into the biggest single purchase in your life: a home of your own. Maybe it is only the first of many; maybe it will be the one where your grandchildren will visit.

However, unless you paid cash for it, live in an area with no potential weather disasters or hardships, invested in a contractor staff to periodically check for preventative repairs, never accidentally slam doors, bang into walls, or use too much “tp”, and plan to have perfectly-mannered Stepford children who will do the same, you need homeowners or condo insurance for your new home.

But how much insurance is enough for your home? Does the policy cover natural disasters? What about the furniture, cars and other items stored in your home? Much like health insurance (see “Understanding Types of Health Insurance”), there are so many home insurance options.  You may feel overwhelmed and unsure that your coverage will meet your needs. Take a breath and read on for some introductory information.

To start, a basic homeowners policy covers the following:

• The Structure: If your home is damaged or destroyed in a fire or other disaster, your insurance will cover the cost of repairs or rebuilding. The type of disaster has to be listed on your policy.

There is no flood or earthquake coverage in standard homeowners policies. However, you can obtain flood coverage through the Federal Emergency Management Agency (FEMA) by visiting their www.floodsmart.gov website. Separate earthquake policies are also available.

• Personal Belongings: The contents of your home---including furniture, valuables, and other belongings are also insured as part of your homeowners policy. The Insurance Information Institute (III) notes that the coverage limit is generally 50% of the value of your home.

Keep in mind that although certain valuables, collectibles, and computer or construction hardware is covered, there are limits. If you think you have more of these types of property in value than is covered by the policy, consider getting a separate personal items policy (see budgeting-help.com for more on personal items insurance options)

• Liability Coverage: You have insurance in case of accidents that occur in your home; in case a lawsuit or civil claim ensues, this aspect of your coverage provides protection.

• Living Expenses after Disaster: If your home is damaged or destroyed, making it uninhabitable until the repairs are complete, the costs of temporary relocation can be covered by your homeowners insurance.

Knowing the basic tenets of a homeowners policy, you should now learn about the different types of coverage. See “ Types of Homeowners Insurance Coverage” for more information.

Additionally, if you do not own a home, or condo, please see “Other Home Insurance Options” for information about coverage for your type of home.

References

Author, Unknown. Types of Insurance
Floodsmart.gov. How to Purchase Flood Insurance
Insurance Information Institute. What is Homeowners Insurance?