What Type of Insurance Do I Need When Buying a Home? - 23 Legal

What Type of Insurance Do I Need When Buying a Home?

Are you in the midst of purchasing your first home? You’ve heard about home insurance but aren’t quite sure what to look for. Has your family home loan been approved? Congratulations! But, the loan that you have been approved for requires homeowners insurance and you are suddenly overwhelmed by the prospect of not choosing the “right” coverage. Lucky for you, 23 Legal has compiled a few steps to help ensure (pun intended) that you find the best insurance for your home.
Homeowners insurance includes several types of coverage that come in handy. Homeowners policies typically include liability coverage in the instance you’re held responsible for an accident or injury. We recommend obtaining insurance for your home as soon as you sign a contract and agree on a closing date. “Do you need to have homeowners insurance before closing? Yes, you’ll typically need to prove at closing that you’ve paid the first full year of premiums on your homeowners insurance.”
There’s value in asking others about their experiences with purchasing homeowners insurance. Speak with friends and family about their regrets and successes. This will give you a strong foundation to build off of. They may even suggest a company they trust. Attorney Ben Weaver shares a few reasons you’ll need homeowners insurance and key aspects to look for when shopping around:
Homeowners insurance will likely be required by your mortgage lender…

Even if homeowners insurance isn’t required by law in your state, you’ll typically need this type of insurance if you plan on financing your home. Home insurance protects your lender’s investment (your loan) from loss or damage caused by natural disasters, vandalism, theft, and more.

The Insurance Information Institute shares statistics that you don’t want to ignore…
  • Homeowners claims related to wind or hail are the most frequent; the costliest are related to fire and lightning.
  • About one in 20 insured homes has a claim each year.
  • About one in 40 insured homes has a property damage claim related to wind or hail each year.
  • About one in 50 insured homes has a property damage claim caused by water damage or freezing each year.
  • About one in 400 insured homes has a property damage claim due to theft each year.
  • About one in 350 insured homes has a property damage claim related to fire and lightning.
  • About one in 900 homeowners policies has a liability claim related to the cost of lawsuits for bodily injury or property damage that the policyholder or family members cause to others.
Protection from hazards and natural disasters is a must…

Majority of homeowners insurance protects your home and unattached structures on your property (ex: sheds, garages) from a wide range of hazards, including wind damage, fire, vandalism, tornadoes, hurricanes, and thunderstorms. Even if it’s only a small portion of your property that gets damaged…or if your entire house is leveled. The insurance on your homeowners policy will step in to help pay for repairs and replacements so you won’t be left with the entire bill.

“Homeowners insurance policies generally cover destruction and damage to a residence’s interior and exterior, the loss or theft of possessions, and personal liability for harm to others. Three basic levels of coverage exist: actual cash value, replacement cost, and extended replacement cost/value.” Investopedia
What Type of Insurance Do I Need When Buying a Home? - 23 Legal
Insurance can protect your home from material loss…

In the unfortunate event that your home is burglarized or damaged by natural causes, outside of wanting everyone to be safe, you’ll also want to ensure that the things you purchased with your hard earned money can be replaced. This includes personal items, such as furniture, electronics, appliances, clothing, and more. If you are like many Americans right now during the pandemic, you rely on your home office and virtual work equipment. The last thing you need is to not be able to earn your paycheck due to the loss of property!

Read article “Making sure your home is properly covered for a disaster” for tips to avoid being underinsured!
Liability reasons…

Your homeowners insurance can do more than just cover the structure of your home and its important contents. Personal Liability insurance, which comes standard and attached to homeowner insurance, can cover you in the event of a lawsuit arising from an injury on your property. There are injuries in which you can be held liable for, such as a nextdoor neighbor falling on your property because you didn’t shovel your driveway, or an accidental drowning due to an open gate that leads to your pool in the backyard. These scary potential accidents require protection not just on a physical level, but also financially.

“Personal liability occurs in the event an accident, in or out of your home, that results in bodily injury or property damage that you are held legally responsible for. Be sure to carefully review your home or renters policy so that you have a solid understanding of what is and isn’t covered by personal liability insurance.” Nationwide

What does homeowners insurance actually cover?

According to Insurance.com, the most basic home insurance policy usually covers at least five coverage areas:
  • Dwelling coverage: this is what covers your home.
  • Other property: this is what covers detached structures on your property.
  • Personal property coverage: this is what covers the property within your home
  • Liability coverage: this is what covers you in case a visitor suffers a serious injury and sues you.
  • Additional living expenses: this is what covers you in case your home is uninhabitable, and you need to live elsewhere.
Other important information to know about homeowners insurance policies:
  • Home’s replacement cost
  • What your policy doesn’t cover
  • Home insurance discounts
  • How your credit score affects your rates
  • What is a CLUE report
  • Homeowners insurance deductibles
  • Does home insurance cover flooding?
  • Do you need earthquake insurance?
  • Trusted homeowner insurers
  • Shopping for homeowners insurance
  • Homeowners insurance rates by company and state
Is buying home insurance pricey?

The cost of homeowners insurance will vary depending on the age of your house, location of the house, and other factors; however, The Federal Reserve Bureau says “the average cost of an annual premium for homeowners insurance is between $300 and $1,000. For most homeowners, the annual costs for such a policy can be estimated by dividing the value of the home by 1,000, then multiplying the result by $3.50.” The cost of having to rebuild or face disastrous situations without home insurance can be catastrophic! Paying for the homeowners insurance is truly worth having a safety net.

“The amount of homeowners insurance you may need depends on the value of your home and your possessions. First, talk to your agent about a recommended dollar amount that will cover the value of the structure of your home, but also crunch the numbers to determine how much it would cost to rebuild in your area. Next take an inventory of your belongings to see if their value falls within the policy dollar limit for personal property, typically set at 50% to 70% of the amount of insurance on the dwelling.
Consider getting Replacement Cost overage, which can pay the amount needed to replace your items, rather than Actual Cash Value coverage. Think about how much Additional Living Expenses coverage you’d need if you were displaced from your home for an extended period. And finally, decide on the amount of liability coverage you need. The Insurance Information Institute (III) recommends you buy enough to cover your assets, or at least $300,000 to $500,000 worth of coverage for the average homeowner.
Keep in mind that many insurance carriers offer discounts if you bundle multiple policies, install smart home technology or have a ‘green’ home. Check with your carrier or insurance agent to learn about ways you can potentially save on your homeowners insurance.” Travelers
Insurance should never be an afterthought! It’s wise to be prepared for anything that may happen, especially when important financial assets are involved. Although money isn’t everything, a peace of mind for you and your family is priceless. That’s why investing in the proper home insurance from the beginning will have major benefits! Attorney Ben Weaver has seen many clients be grateful that they took the time to research and choose the best coverage for their family and beloved new home.

Would you like some recommendations or help reviewing a policy? Are you looking for a lawyer to help with closing on your new home? 23 Legal is happy to assist you! Contact Ben today to learn how he can help your family: (630) 306-9736

Attorney Ben Weaver is an expert in Real Estate Law for Arlington Heights, Prospect Heights, Mount Prospect, Des Plaines, Glenview, Park Ridge, Wheeling and the surrounding communities.

Contact Ben Today to Ask Questions About Buying Your First Home!

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