Here’s what you need to go know to get the best policy for your home and your budget.
What Does Home Insurance Cover?
At a basic level, home insurance covers a few major areas related to your home:
- Dwelling coverage: This is the home itself
- Personal property: The possessions within your home
- Other property: Garages or other structures on your property
- Liability coverage: If a guest or visitor to your home suffers an injury, this covers medical costs or other associated expenses
- Additional living expenses: If your home is damaged to the point of being unlivable, this will cover alternate accommodations
- It might seem counterintuitive to purchase home insurance before you complete the purchase on your home, but you are required to bring proof of insurance to closing. As soon as you sign the papers at closing, the house is yours, and you need to be prepared in the event something happens — no matter how unlikely it might seem.
- Start looking online for insurance quotes a few weeks before your closing date. This is a good opportunity to review your existing auto insurance, life insurance, or other policies to look for opportunities to bundle and save money on a combined policy with one company.
How to Pay for Home Insurance
- Once your policy is in place, home insurance will be rolled into your monthly mortgage payment. Specifically, it will be paid using funds from your escrow account.
- The amount you’ll pay varies based on your location and the home you buy, but an average policy costs around $1,000 per year. Depending on your insurance company, you may be eligible for discounts over time.
- This figure is important to keep in mind as you are working on your budget as a new homeowner. You might not be able to afford as much house as you think once you add insurance, taxes, and other fees!