If you are buying your first house, one thing you may have to do is get rid of your renters insurance policy and upgrade to a home insurance policy. While these policies may serve a similar purpose, they are quite different. Here is what you'll need to know about the differences between home and renters insurance.
Expect to Pay More Money for Home Insurance
You'll find that the home insurance is going to cost more money than your old renters insurance policy. This is completely understandable, but it may be a shock if you were not expecting it. This is because you are not only securing the personal property in your home, but the actual structure of the home and the appliances inside it. Being in an area that is considered a high risk of flooding can also increase your premiums. This is why it is worth shopping around and getting quotes from different insurance providers to see who has the best offer that meets your needs.
Expect to Pay Annually for Home Insurance
You may be used to budgeting for renters insurance with a low monthly payment. However, this is not the case with home insurance. It is quite common for home insurance to be paid as one big premium annually. This means you need to prepare to have the cash on hand to make the large insurance payment that will cause you to be set for the rest of the year. Don't worry, if you sell your home prior to your policy ending, you can get a refund for the months that you did not use.
Some people include the cost of home insurance with their escrow funds for their mortgage, but you may also make the payment on your own if you do not use escrow.
Expect to Buy Additional Policies for Complete Coverage with Home Insurance
One confusing way that renters and home insurance is different is how items are covered. With renters insurance, you had a blanket policy that covered your belongings no matter what. However, home insurance has different policies for different situations. This means that if you want to have personal property covered due to a flood, you actually need flood insurance.
Being new to home insurance can be confusing. If you need clarification on the policy you need to purchase for your new home, be sure to work closely with a local insurance agent. They can help review your policy choice to make sure you're covered.
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