Being a homeowner means you have many responsibilities. You need to take care of your home, your family members (who rely on you to make mortgage payments), and those who visit your property.
Consider these types of insurance to protect your home, your family’s future, and yourself.
1. Homeowner’s Insurance
Homeowner’s insurance coverage allows you to protect your real estate investment. Mortgage companies typically require this insurance and its cost is included in your monthly mortgage payment.
The particulars vary but generally a homeowner’s insurance policy covers property damage arising from theft, vandalism, windstorms, fire, and more. In addition to reimbursing you for losses associated with structural damage, homeowner’s insurance may cover personal possessions, outside living expenses while repairs are being made to your home, and costs associated with a visitor’s injury that occurs on your property.
Insurance coverage may be structured to make payments based on the current depreciated value of your home, its replacement cost, or an extended amount.
Depending on your location, risk factors, and preferences, a policy may also include supplemental coverage for earthquakes or you may buy separate flood insurance to complement your homeowner’s policy.
2. Life insurance
If you have a mortgage loan, you’ll most likely want to have life insurance. Should you or your spouse die before the mortgage is paid in full, insurance proceeds can help you make monthly payments or pay off the loan balance.
Generally, getting a term life insurance policy is a good way for you to deal with the possibility of your death or the death of your spouse, if you are married. Consider taking out insurance policies for the amount of the mortgage balance for the term of the loan.
For example, obtain a policy valued at $250,000 for 30 years if you have a 30-year fixed rate mortgage with a loan balance of $250,000. If your husband (or wife) dies before the mortgage is fully paid, insurance proceeds can be used to pay the remaining mortgage balance plus provide cash for any home equity loans, home repairs, and related expenses.
Similarly, you could obtain mortgage life insurance, which offers coverage that declines as your outstanding balance on your mortgage declines. This type of insurance typically names the mortgage company or bank as the beneficiary, so the use of cash proceeds is more limited compared to a standard life insurance policy.
You might also purchase disability insurance to protect your income should you become disabled and unable to work.
3. Liability insurance
Even though liability coverage may be included with your homeowner’s insurance, you may consider buying a personal umbrella insurance policy for extra protection.
A personal umbrella insurance policy may help pay expenses related to injuries that occur on your property. For example, if a visitor falls on the steps leading to your home’s main entrance and this person has unusually high medical expenses relating to an injury from the fall, an umbrella policy could cover expenses not reimbursed by your homeowner’s policy. While such occurrences may be infrequent or rare, this insurance coverage can protect your most valuable assets, including your home and other investments.
Whenever you experience a life change, whether getting married, having children, landing a first job, or buying a home, revisit your insurance coverage. As a homeowner, you have responsibilities that warrant coverage for your property and your ability to pay the monthly mortgage payment as well as costs associated with activities and injuries on your property.
To learn details about the insurance you should carry, determine your specific requirements, and get a policy designed to fit your needs, talk to a certified financial planner and/or licensed insurance agent.
