Your lender will require you to carry homeowner's insurance coverage against damage by fire and other hazards and which names you and the lender as the insured. If the home is damaged or destroyed, the lender will then be able to recover the amount of its loan from the insurance company. The insurance company will pay you the balance of the policy limit over and above the amount of the loan.
Homeowner’s insurance typically runs from several hundred to more than a thousand dollars a year depending on the value of your home and what you choose to have covered. Premiums are often paid as part of your monthly mortgage payment.
There are a number of different options for coverage. You may:
- opt to just cover the physical housing structure and any permanent attachments.
- incorporate non-permanent attachments such as a pool, fence or shed.
- include personal property like furniture, jewelry, artwork and electronics.
If you conduct business out of your home, make sure you have a policy that covers your clients should they sustain an injury while on your property.
Renters may look into what’s called renter’s insurance. Your landlord has homeowner’s insurance to cover the physical structure, but you may want to insure your personal property – such as furniture, electronics and jewelry – from many perils like fire, vandalism and theft. This type of insurance also protects you if a visitor is injured or other property is damaged in your dwelling.
You pay a premium based on the value of your protected belongings, the age of the structure in which you live and other factors such as functioning smoke alarms. Renter’s insurance can often be just a few hundred dollars a year depending on your situation.
With any type of insurance, always read the contract for specific explanations of coverages and exclusions.