When you buy a home, insurance is an important consideration. Mortgage insurance is required if you have less than 20% equity in your home, and is something you’ll be able to walk through with your banker.
Aside from mortgage insurance, you also need a homeowner’s policy, which usually consists of five parts:
Covers the dwelling itself, not including land. Typically, a coinsurance clause states that as long as the dwelling is insured to 80% of actual value, losses will be adjusted at replacement cost, up to the policy limits. This is in place to give a buffer against inflation.
- Other structures
Covers other structure on the property not used for business, except as a private garage.
- Personal property
Covers personal property, with limits for the theft and loss of particular classes of items.
- Loss of use/additional living expenses
Covers additional living expenses (i.e. rental expenses) and fair rental value, if part of the residence was rented.
- Personal liability
Covers damages for which the insured is legally liable and provides legal defense at the insurer's own expense. For example, dog bites would fall under this coverage.
There might be exclusions for certain events, such as a flood, although there may be additional coverage you can purchase. For expert advice, your banker can refer you to a Starion Insurance agent.