What is home insurance, and what does it cover?
In a nutshell:
Homeowner’s Insurance (HOI) provides your home with financial protection against disasters. It protects the house itself and everything in it, as well as provides liability coverage in case anyone injures themselves in your home or on your property.
Getting home insurance must happen before close of escrow, and lenders will insist on it.
What does home insurance cover?
- Damage to your property and legal responsibility for any injuries you or your family cause to other people in the house
- Damage or destruction due to fire, hurricane, lightning, hail or other disasters
- Accidents such as someone slipping and falling on your driveway, or your dog biting a visitor in your living room
- Personal belongings inside the home, including furniture, electronic and sports equipment, and clothes
- Damage caused by earthquakes, floods or lack of proper maintenance (you can purchase additional coverage or a separate policy for those)
- High-end items like jewelry, art and collectibles (these items require additional coverage if you want to insure them for their full appraised value)
Cash value vs. replacement cost:
You have two choices when insuring your home and belongings. If you opt for “actual cash value,” you receive the amount of money needed to repair or replace your home after depreciation is factored in.
With a “replacement cost” policy, your home will be restored to “like new” condition using materials of similar quality, without considering depreciation. If you have an older house with rare moldings and hard-to-find fixtures, you should insure your home for 80% to 90% of its replacement cost.
The liability protection of your home insurance policy includes such accidents as someone slipping and falling on your driveway, or your dog biting a visitor in your living room. It covers you against lawsuits for bodily injury or property damage that you or your family members (and pets) cause to other people.
Finding the right home insurer:
You need homeowners insurance to complete your mortgage. Buying it is super easy with Matic. They’ll help you find the best insurance rates so you can save money and close your loan quickly. Get started at https://openlistings.maticinsurance.com.
In California, your home insurer is legally required to offer you earthquake insurance at an additional cost. (Hint: Take it).
Other considerations, depending on where your dream home is located, such as the history of claims in your neighborhood and on your property, may make home insurance difficult to obtain; i.e. if you chose an area prone to wildfires or mudslides.