What do I need to know about homeowners insurance?

Answer

Women reading about owing a home

You aren’t required to have homeowners insurance on your house or condo as you’re required to have auto insurance to drive a car. If you have a mortgage, however, your lender probably requires you to have homeowners insurance. Plus, it’s a good idea to have it whether you’re required to or not.

What does it cover?

Homeowners insurance covers losses related to your home.

  • The cost if someone is hurt in your home
  • A hotel room in case you need to move out while repairs are made
  • The structure of the home itself and the plumbing, wiring, heating and air
  • Your possessions if they were damaged or stolen, even if they weren’t in your house at the time

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Shop around

Get quotes from three or four companies before choosing one. The main factors that determine your premium are how much your house is worth and your personal possessions. The cheapest policies are usually for renters.

You want one for homeowners, which costs more. Typical policies don’t cover floods or earthquakes, so if you live in an area prone to either, you might want to buy additional coverage.

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What Should I Buy?

Choose a policy that covers the full replacement cost of your home. Then determine what your personal possessions are worth. A good rule of thumb is to insure your possessions at 50 percent of what you insure your house for. You also need to choose a deductible, which should be as high as you can afford to lower the premium.

Typical Cost

Most people pay about $35 a month per every $100,000 worth of coverage. This varies based on the area in which you live and if you add extra coverage. You might save money if you bundle your homeowners insurance with other insurance policies, such as auto or life insurance. Installing a security system might also lower your rate.

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