As a homeowner who has just bought a house or in the process of investing in a home, you’re likely well aware of the importance of getting adequate insurance to keep your investment safe. Most houses cost thousands of dollars and it makes sense to safeguard that amount against potential risks. When researching about the types of insurance you’ll likely need, you’ll learn that every state and county is unique. Coverage providers will advise you according to the climatic conditions, geographical setting, and any other factors that can influence the losses you may have to bear.
Read ahead for a quick overview of the insurances to get and how they can protect you.
1) Private Mortgage Insurance (PMI)
You’ll need to get Private Mortgage Insurance at the time of taking out a mortgage for buying the property if you’re putting down less than 20% of the home value as down payment. Like the consultants at Cane Insurance advise, you can buy the required insurance online or through an agent. PMI is designed to safeguard the interests of the lender in case you’re unable to repay the loan amount even though you have an impressive credit score.
Typically, you’ll pay premiums of 0.5% to 1% of the property value. But the interesting thing is that once you’ve paid off more than 20% of the mortgage value, you can request that the lender cancel the PMI. Further, if you’ve been making regular payments for half the duration of the mortgage term or 15 years, you can get the PMI canceled.
2) Homeowners Insurance
Homeowners insurance is one of the most essential types of insurance. Depending on the type of home you have, or where you live, you might need different types of insurance. For example, a tiny house insurance policy would look a lot different than a mansion in the same area. That’s because this coverage protects you from a wide range of risks starting with the actual structure of your home and its peripherals to all the belongings you have in the house down to the smallest items. In case your property is destroyed completely or partially damaged, the provider provides the necessary funds to rebuild or conduct repairs. In this way, the homeowners’ insurance also protects the original mortgage provider.
At the time of applying for homeowners’ insurance, you may want to explore the exact coverage it provides and the cost. Different companies have their set of inclusions of deductibles that you should examine carefully. It also helps to shop around from time to time to check for better rates and additional risk protection you may need years down the line. For a better understanding of the how these types of insurance work, check out this feature on Investopedia.
3) Liability Insurance
In recent times, liability insurance is become vital to protect you or a family member in case a third person is injured because of negligence. These types of insurance protect you with coverage for medical bills and legal fees even if you damage another person’s property. As long as you’re legally responsible for the incident, whether or not it occurred inside your home, you could incur losses going up to thousands and maybe, millions of dollars. Liability insurance can cover all costs and prevent heavy losses arising from lawsuits just as this article on Nationwide explains.
4) Personal Umbrella Liability Insurance
In addition to liability insurance, you may also want to consider getting personal umbrella liability coverage. This policy takes over from the liability insurance and covers the extra costs that your basic protection will not cover. For instance, say, you were involved in an accident and the homeowner’s policy will only cover the initial $500,000. Assuming that you’ve bought umbrella insurance worth $2 million, the provider will pay the expenses above the $500,000.
5) Natural Disaster Insurance
Protection from natural disaster is possibly one of the first types of insurance every homeowner gets. But, if you have any doubts, know that according to the Insurance Journal, insurance companies paid out a stunning $90 billion to cover natural calamities in the year 2018 alone. Even more shocking is the fact that the total damages are estimated to be around $225 billion that accounts for a shortfall of 60%. The main kinds of disasters you need to plan for mainly include floods and hurricanes, and earthquakes.
6) Flood Insurance
When you’re ready to buy flood insurance, know that you’ll get coverage from the National Flood Insurance Program as described by the folks at The Conversation. This program specifically protects from damages arising from flooding. While it is mandatory for people taking mortgages to buy homes to also buy this coverage, close to 43% of homeowners believe that they’re not at risk from the disaster. And, that leads to even more substantial losses. To give you an estimate of the losses arising from the hurricanes, the National Flood Insurance Program paid losses worth $8.8 billion for Sandy, $16.3 billion for Katrina, and $8.7 billion for Harvey. If you’re debating if you need flood insurance, here are 3 good reasons.
7) Earthquake Insurance
Even if you don’t live in one of the 6 states proclaimed as earthquake-prone by the U.S. Geological Survey, getting a policy may be a smart idea. That’s because earthquakes can happen in any location and when they do occur, they cause substantial losses. You’ll need to get separate coverage for this risk given that your basic homeowners’ insurance will not offer you protection. Unfortunately, even the people living in high-risk states like California and Oklahoma may not have policies. Research shows that just 10% of owners invest in coverage despite being priced at about $1.75 per $1,000 of the property value.
For more in-depth information about the types of insurance you should get, it is best to consult an expert agency that will guide you on the appropriate amount of coverage you need. Before you go ahead and buy policies, make sure to go your homework and scout around various companies to find the most economical rates and maximum coverage. This investment will go a long way in protecting your property and everything you hold close to your heart.
