4 Questions About Homeowners Insurance And Renter Insurance Answered

What do first-time buyers need to know about home insurance? If this is your first real estate purchase, take a look at the top questions about homeowners insurance, insurance providers, and the differences between renter insurance and home policies.

What Is Homeowners Insurance?

As the name implies, this type of insurance policy covers a home that you own. A standard policy protects the primary structure and your belongings. But this doesn't mean the insurance policy will pay for every type of home damage. These policies usually cover destructive acts or events, such as windstorms, lightning strikes, fires, hail, theft, or vandalism. Even though a policy may cover damage from a windstorm or other act of nature, it won't pay for flood-related issues and may have some other exclusions.

Why Do You Need This Insurance?

Will you be financing your home? If you answered yes, then your mortgage lender will require you to purchase an insurance policy. This policy covers the mortgage company's investment in your property in the event of a major disaster or other type of damage. Without an insurance policy, the mortgage company is at risk of losing its stake in your home. 

Not only will an insurance policy protect the lender, but it also protects you as the homeowner. Failure to purchase a homeowners policy would force you into paying out-of-pocket for 100 percent of the expenses related to home damage. This includes damage to your home or anything in it. But if you have the right coverage, you will only need to pay for your policy's deductible. This could potentially save you thousands of dollars or more.

Where Do You Get A Homeowners Policy?

Most insurance companies offer this type of policy. A home insurance provider can help you learn more about the basic policies available in your area, along with additional types of coverage. Some homeowners choose earthquake insurance, flood insurance, or other add-ons. While these policies do cost extra, they can reduce the homeowner's financial risks.

Are Homeowners and Renters Insurance the Same?

Simply stated, no. If you had renter insurance in a previous apartment, it's likely that you already understand the basics of coverage (such as premiums and deductibles). An existing renters policy will not cover a home that you purchase. Renters insurance does not cover the building or structure where you live. The property owner would need to purchase this type of policy. Instead, it covers liability-related issues, your personal possessions, and some living expenses that result from a disaster or other destructive event.