It is an exciting time becoming a new homeowner. However on top of new ‘wonders’ like interest rates, mortgage payments, and a family possibly, there is homeowners insurance to think about. Although many feel that it is just a wash, and should acquire normal homeowner insurance, there are other factors to account for when deciding on what type of plan to purchase.
A basic homeowners’ insurance policy will cover four main bases. First would be coverage for the structure of the home, this takes care of the home in case it needs rebuilding [such as if a fire were to burn down the house], covering the disasters listed within the policy. Generally there will not be coverage for flood, earthquake routine wear and tear, as there are other separate plans to cover those. Of course, it is important to plan accordingly, if you feel that there a chance of hail, or fire damage, then make sure to put forth enough money to rebuild in case of such an event. A second function of standard homeowner insurance is the coverage of belongings within the home. This also includes protection against stolen items, such as jewelry, which should be appraised and insured for its proper value if it is expensive.
The third and fourth functions of homeowners’ insurance deal with liability coverage and additional living expenses [away form home]. Liability coverage works to pay court fees and advances for defending the homeowner’s family [or pets] against damage done to another’s property or body. Generally a plan will cover up to $100,000, yet with so many cases now exceeding that, if one can afford it, it is a good idea to insure liability higher, as a number exceeding that barrier can completely cripple a family. The fourth clause will cover expenses for homeowners when they are out of the home, due to a covered disaster. Basic needs are covered [restaurant bills, hotel rooms, living expenses], and depending on the policy can range from 15% to unlimited, for a period of time which the house is not inhabitable.
Now that the overview of insurance is through, it is important to decide if other insurance is needed. It should be a no-brainer. If one can afford it and lives in an area such as the pacific coast, that other insurance is needed. Flood / Hurricane, and earthquake damage can be devastating, yet in most areas of the country, is not a threat. For young homeowners who may be tight on the budget, it may be a good idea to only dabble in these areas if it is a high-risk area in which the house is located.
There really is a lot of work in being a young homeowner, however as with most issues, proper knowledge can go a long way in a successful ownership. Insurance is definitely an issue that should not be made a snap decision, remember not every case is the same, make sure not to fall into a general trap, get a plan that is tailored to the house.
For most, analyzing ones bank account is never a fun task. The ones who have a lot of money really have no need to do so, and for the rest, well it is just a reminder that we either need to put away more money or we have a long way to go before settling down.
Being in that middle age it can be especially scary to look down at the bottom line. However with that, a plan of action should be made.
Too often in decision making a rational head is not effectively used to see the best possible path. In this case, money often drives people to unnecessary or drastic measures.
