Whether you bought a fixer-upper you intend to flip in five years or moved into your forever home, you’re likely experiencing a mixture of emotions ranging from excitement to anxiety. Real estate is a wonderful asset and can help you to grow your wealth over time. Nowadays many homeowners are renting out basement suites. Earning passive income as a landlord is easier than ever, especially with the availability of landlord software that allows you to set up a tenant screening report for each potential housemate.
But homeownership involves more than simply making your surroundings look aesthetically pleasing. Once the boxes are unpacked and the walls have a fresh coat of paint, you will have to contend with the new responsibility you have. What your first car is to your teenage years, your home is to your adult years. Few purchases you’ll make in your adult life are more expensive, and more valuable, than a home. It’s likely that you purchased it with the knowledge that it will continue to be a valuable asset to you even in uncertain economic times, and it’s true that owning a home can bring you a lot of security that renting doesn’t allow.
If you’re not adequately insured, you might experience negative consequences that you didn’t sign up for when you signed on the dotted line. Before you change the locks and get move-in ready, be aware of the potential risks of moving in uninsured before setting out on the adventure of homeownership. You wouldn’t walk off a car lot with a brand new vehicle without first inquiring about car insurance, as this car dealership in Colchester, CT, and its clientele know. On a similar note, when you buy a house, acquiring homeowners insurance should be your top priority. If you decide to opt out, you could face considerable expenses down the road.
It helps protect you from the unexpected.
No one likes to imagine the worst possible scenario, but one brutal ice storm, tornado, fire, or onsite injury can complicate things for you and your family. You can’t predict the future, and homeowners insurance offers you peace of mind. Should your home become vulnerable to disaster or vandalism, and it is not insured, you could be drowning in debt in no time. If a guest becomes injured on the property, you could be forced to pay liabilities, which can cost thousands of dollars and plunge even the most fiscally responsible homeowners into serious debt.
Suffering any type of catastrophic disaster or loss can be emotionally and psychologically devastating. Knowing that you are protected and will be able to maintain your current standard of living even in the case of a crisis should motivate you to buy homeowners insurance. Additional living expenses include, but are not necessarily limited to, rent for temporary lodging in the aftermath of the crisis, laundry, meals, furniture replacement, pet boarding, and storage space.
If you live in a region where inclement weather is common, homeowners insurance is strongly recommended. Extra living expenses are often included in homeowners insurance in the case of a serious natural disaster that forces you out of your home for an extended period of time. But insurance companies, such as this company who provides homeowners insurance in New Jersey, state that it’s crucial to invest in it no matter where you live.
Liability coverage is another important aspect to homeowners insurance that keeps homeowners guarded against potential legal fees. While your first thought related to insurance might be property damage, bodily injury on your property is something else to consider when you buy a home. Liability protection helps provide you and your family with the peace of mind that comes with knowing that they will not be forced to pay outrageous legal and medical costs after a traumatic injury on your property.
If you invite people over and one gets injured, that person has the right to sue you. If you are not adequately protected, you could be forced to pay out of pocket for your defense attorney’s services or medical payments. The only way to guarantee that you will be covered in the case of a legal battle over an onsite injury is by investing in liability protection. Many policies provide a minimum of $100,000, but you can increase the liability coverage if you feel you require extra safeguards.
It helps you finance your home.
You might be surprised to learn that your ability to get a mortgage in the first place can be directly affected by your decision to opt in or out on homeowners insurance. Many homeowners have found that it can be difficult to even acquire a mortgage without agreeing to pay homeowners insurance. Unlike car insurance, which is a state requirement, homeowners insurance is not technically necessary to obtain a mortgage, but most lenders will consider you a liability if you don’t invest in it. As such, it is definitely in your best interest to get started off on the right foot with your lender and obtain insurance.
Many lenders will view an uninsured home as a major liability and consider you a risk not worth taking, while some will charge you more if they find your property is not adequately covered. Typically, the minimum amount of homeowners insurance corresponds to the amount of your mortgage. If you don’t keep your home insured, your lender may open a homeowners policy in your name and tack on the added payments to your monthly bill.
A fixed amount of coverage may be sufficient, but typically, lenders will advise you to purchase enough homeowners insurance to keep your mortgage balance protected as well as the equity of your home in the event of a major loss. Policies differ depending on where in the world you live, and lenders are acutely aware of whether you are moving into what is known as a “disaster zone.” Areas where earthquakes, tornadoes, hurricanes, and major ice storms are common typically require additional insurance since you are choosing to purchase a home in a high-risk, hazardous location.
It keeps your personal belongings safe.
Over the years you’ve probably collected some valuable material assets that you would not wish to lose. In the case of an accident or loss, it would make you feel better to know that your most precious belongings are covered. Whether you have a lot of expensive jewelry, irreplaceable family heirlooms, or a grand piano in your living room, homeowners insurance is the only way to be absolutely certain that your favorite things are sufficiently protected in the case of a serious crisis.
One thing that surprises many people about homeowners insurance is that it protects your family’s things no matter whether they still live on the property or not. If you’re backpacking abroad and your suitcase goes missing at a hostel in Prague, or you send your children away to college and their dorm decorations become damaged, they will be covered, as long as you have a policy that covers belongings that are located elsewhere.
Some additional buildings on your property will be covered, too, depending on your policy. If your garage is crammed full of old junk you wouldn’t mind losing, this might not be meaningful to you. But you might use a detached shed on your property as a workshop and have many irreplaceable woodworking tools that you would certainly miss in the case of fire or theft. If you have valuable personal belongings in other places besides your main home, speak to your broker about the variety of options available to you.