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Homeowner’s insurance is necessary to protect your most significant investment – your home. And while you never want to think about worst-case scenarios, the right coverage is your safety net if something goes wrong. Here’s how it helps you.
- Covers Repairs and Rebuilding Costs: If your home is damaged by fire, storms, or other covered events, your policy helps pay for repairs or even a complete rebuild.
- Protects Your Belongings: Many policies can also cover personal items like furniture, electronics, and clothing if stolen or damaged.
- Provides Liability Coverage: Homeowner’s insurance can help cover medical bills or legal expenses if someone gets injured on your property.
In the simplest sense, it gives you peace of mind. Knowing you have protection against unexpected events helps you worry less. And with such a big purchase, having that reassurance is a big deal.
While your first insurance payment will be included in your closing costs, you should also include it in your budget beyond closing day. That’s because it will be a recurring expense once you get the keys to your home.
Here’s what you need to know to help you budget for this vital part of homeownership today.
Costs and Claims Are Rising
In recent years, insurance costs have been climbing. According to Insurance.com, there are four big reasons behind the jump in premiums:
- More severe weather events and wildfires are leading to higher claims.
- Insurance companies are pulling out of high-risk areas, reducing options for homeowners in some states.
- Past rate increases haven’t kept up with the rise in claims.
- The cost to rebuild or repair homes has increased due to higher material and labor costs.
Disasters happen more often, repairs cost more, and insurers must adjust their rates. Data from ICE Mortgage Technology helps paint the picture of how the average yearly premium has climbed over the last decade (see graph below):
What You Can Do About It
Homeowner’s insurance is a must to protect your home and your investment. But with costs rising, you’ll want to do your homework to balance the best coverage you can get at the best price possible.
Homeowner’s insurance rates vary widely based on location, provider, and coverage. Shop around and compare quotes before settling on a policy. And don’t forget to ask about discounts. Things like security systems or bundling with auto insurance could help lower your insurance costs.
Bottom Line
When planning to buy a home, looking beyond just your mortgage payment is essential. You’ll also want to budget for your homeowner’s insurance policy. It gives you a lot of protection against the unexpected. And while it’s true those costs are rising, there are things you can do to try to get the best price possible.
What’s your biggest concern about budgeting for homeownership? Let’s discuss it and make sure you’re set up for success.
