Have you recently bought a new home or moved into that cool new apartment building? Congratulations! Before you start planning your housewarming party, however, you’ll need to tie up an important loose end: insurance.
Homeowners insurance and renters insurance are as essential to your dwelling as the front door. In fact, most mortgage companies require borrowers to purchase homeowners insurance and landlords are increasingly requiring tenants to buy renters insurance. But even if you own your home outright, you still need homeowners insurance to protect that which you can’t afford to lose. It’s really that simple.
There are some similarities between the two types of policies, but there are also some significant differences — so it’s important to understand what these policies generally do and don’t cover. Costs can also vary widely depending on your selected deductible and coverage options. Be sure to shop around and understand the costs before purchasing a policy.
What does homeowners insurance cover?
If your home is damaged or destroyed by fire, hurricane, hail, or lightning, your homeowners insurance will help pay for repairs or replacements. Many policies will also cover damage to other structures on your property, such as a tool shed or gazebo. Furniture, clothes, and other personal belongings are also covered if they’re stolen or destroyed. Be aware, however, that expensive personal property, such as jewelry, will be covered by homeowners insurance only up to a certain amount. If you want to protect pricey items, you can add a personal property endorsement or floater to your homeowners policy.
Homeowners insurance doesn’t cover everything, however. For examples, most policies won’t cover damage or destruction caused by a flood or earthquake — so if you live in an area where floods or earthquakes happen regularly, it may be wise to purchase a supplemental policy. Burst water pipes can be another headache. Most policies will cover damages caused by a burst water pipe, but they won’t pay to repair or replace the pipes themselves. Other incidents that most homeowners insurance policies won’t cover include:
- Termite damage.
- Sewer backups.
- Sinkholes (except for homes in Florida and Tennessee).
Remember that all homeowners insurance policies are different, so read the fine print and talk with your agent about your specific policy’s coverage.
What does renters insurance cover?
Renters insurance is designed to protect you and your personal property — and provides broader coverage than many realize. For example, your renters insurance may cover:
- Off-site property. For example, if you have a storage locker, most renters insurance policies will cover your off-site belongings up to 10% of the total policy.
- Personal property while you’re traveling. If your luggage is stolen or your clothes are damaged while you’re traveling, your renters insurance can help cover these losses.
- Relocation if you have to vacate your home. If you need to leave your place due to an incident that makes it temporarily uninhabitable, you may be covered until repairs are made. In this case, your renters insurance can help cover a hotel room, boarding for your pet, and other costs that crop up because of your temporary relocation.
- Your car being burglarized. If you have personal property in your car and someone steals it, your policy may help replace the stolen items.
- Spoiled food if electricity goes out. If there’s a power outage or the refrigerator stops working, your renters insurance policy may help pay to replace the food that went bad.
- Injuries that happen to others when they’re at your home. All renters insurance policies come with a minimum of $100,000 in personal liability protection. Let’s say you have a friend over and your dog bites your friend, leaving a wound that requires stitches. Renters insurance will cover the cost of your friend’s medical bills up to the personal liability protection included in your policy.
Like homeowners insurance, renters insurance policies can have quite a bit of fine print and details. If you have questions, reach out to your agent or renters insurance company directly.
Moving into a new place, whether you bought it or are renting it, can be exciting. But don’t let the excitement get in the way of purchasing and understanding a homeowners or renters insurance policy. It’s more important than unpacking, painting, and yes, even the housewarming party.