Nothing quite prepares you for homeownership. It’s a financial investment that comes with many benefits and many questions. For instance, how do you protect your investment? One answer — insurance.
Insurance is a means of protection, covering the costs of repairs and replacements if your home or belongings are damaged by unexpected events. However, it’s important to understand the details of the insurance policy you have on your home, as not all policies offer the same amount of protection.
Homeowners insurance is a form of property insurance covering losses and damage to the residence, along with furnishings and other items in the home. To receive coverage, the homeowner must purchase a policy from an insurance company.
Another type of insurance is lender-placed insurance. This is an insurance policy placed on the home by a bank or mortgage servicer when the homeowner’s own property insurance lapses, or if the current policy falls short of required coverage.
Lender-placed insurance is typically more expensive than homeowners insurance and provides less coverage. The policy may not be sufficient to repair or rebuild the home in the event of a loss, and the policy only covers the structure. A lender-placed policy DOES NOT cover your personal property (the contents inside the home) or additional living expenses.
Homeowners Insurance
What it typically covers:
- Your home (structure)
- Personal belongings (furniture, clothes, etc.)
- Liability protection (if someone gets hurt on your property)
- Additional living expenses (if your home becomes unlivable)
Lender-Placed Insurance
What it covers:
- Only the structure of the home
The best way to protect your home, and your budget, is to shop around. Call various insurance companies for quotes requesting coverage options, pricing and what discounts they offer. Many companies will offer bundling opportunities for your car and home, and some may provide senior or veteran discounts as well. Also, don’t let your insurance lapse. If your insurance lapses, it can be difficult to obtain a new policy and often costs more due to the lapse in coverage. Stay ahead by shopping around early to ensure you receive the best coverage for your money.
