The Basics of Homeowner’s Insurance

September 13th, 2011

When purchasing a home, you’ll have to decide on your home insurance policy. And unless you live in an area where natural disasters are common, you may not give it much thought.

But you should.

With all the risk that’s inherently part of buying a home, you should minimize risk whenever possible. One way of doing this is through a solid policy.

In his blog post, “Homeowner’s insurance: Do you have the right type and amount of coverage?” Leonard Baron explains the importance of understanding you policy and reviewing it each year.  He also discusses what and how much is covered:

Dwelling/Structure:  This covers the roof, doors, windows, walls, and so on. Typically this coverage is by square foot. Baron explains,

My house of 1,250 square feet is valued at $560,000 but I only have $205/per square footage worth of coverage, or $256,250 maximum loss payout. That is because the rest of the value in my property relates to land (about $264,000), which typically doesn’t need insurance. Rule of thumb: If you have a big fancy house, you need more coverage.

Personal Property: This part of your insurance covers things like furniture, clothing, flatware and so on. Make sure your policy covers everything, as your property is probably worth more than you think. Discuss items like jewelry and artwork with your agent.

Liability and Law Suit Protection: This protects you again accidents that happen on your property. This is especially important if you have things like a pool or trampoline. Baron says liability coverage is  typically $300,000, but if your net worth is high, it is smart to consider an “Umbrella” policy to increase liability coverage to $1 million+. Talk to your insurance agent to determine the premium cost increase.

It’s important to read the policy binder that your insurance company sends you so that you understand all the coverage items, maximum limits, terms and conditions outlining your coverage with the insurance company.  See your agent to  make sure you have the right type and amount of insurance in place.

Acadia Lending Group LLC

10 Donald B. Dean, Suite 2
South Portland , Maine 04106

Phone: 207-899-4500

Fax: 207-899-4503

NMLS: 370636


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