Home insurance is designed to cover the unique risks homeowners face. You may think that you don’t need home insurance before owning a home, but this isn’t necessarily true. When searching for a home, it is important to keep home insurance in mind an to purchase it as soon as possible.
Do You Need Home Insurance Before Closing?
The ideal time to purchase homeowners insurance is when you close on a home. Before you ever move in or put your name on the home, you should have a home insurance policy in place to protect from accidents, weather and natural disasters.
In fact, most mortgage lenders will require you to carry some form of home insurance at closing. They generally require enough home insurance to cover your mortgage.
How Much Home Insurance Do You Need?
Every home is different, as are your home insurance needs. The amount of home insurance you need should be calculated based on the value of your home, your personal belongings and liability risks.
Total Replacement Cost Value
The total replacement cost value of a home refers to how much it would cost to completely rebuild the home after a disaster, including building and material costs. This amount is not the same as your home’s market value. Instead, you can calculate your home’s total replacement cost value with the help of online calculators with the value of your home per square foot.
There are two main types of home insurance policies when it comes to personal belongings: actual cash value and replacement cost value. An actual cash value policy replaces your personal items after depreciation, meaning that as the value of your items drops, so does the amount of compensation you will receive for filing a claim. Replacement cost values do not account for depreciation and instead allow you to replace your items with those of similar or identical make/value.
Be sure to keep an eye on the value of your belongings and adjust your coverage after you purchase expensive items that may not be covered under a basic policy, such as jewelry, furs and art.
Your lifestyle can actually have an affect on how much home insurance you need, as well. If you frequently host parties or invite people over, you may need higher liability coverage on your home insurance policy. This also applies to families who have children or pets.