A Guide to Insurance for New Homeowners

May 06, 2021

For many homeowners, a home purchase could be the single biggest investment of their lifetime¹— so it is important to make sure this investment is well protected.

Homeowners (HO) insurance can provide homeowners with protection against losses related to fire, theft, and natural disaster, along with additional liability protection if someone suffers an injury (or injures someone else) on the property. Homeowners with mortgage will often start to consider HO insurance because lenders usually require a certain level of coverage.²

Below is a short guide highlighting the ins and outs of new homeowners' insurance protection.

What Structural Losses May HO Insurance Cover?

When most people think of HO insurance, the structural portion comes to mind. Depending on how the policy is written as well as state insurance laws, HO insurance often provides protection up to a certain dollar amount for property damage or loss stemming from a wide range of causes — fire, theft, vandalism, tornado, falling trees or power lines, or lightning.[1]

This protection usually does not cover flood or earthquake damage.[2] However, riders that provide additional coverage for floods, earthquakes, or other natural disasters can usually be added to a policy for an extra fee.[3] This protection can also cover personal possessions, allowing a homeowner to not only rebuild their home but also to replace clothing, appliances, and other belongings.[4]

What Liability Protections Does HO Insurance Offer?

In addition to covering property damage, HO insurance can also protect homeowners from liability to prevent personal assets from being at risk if someone is injured on-premises (or even by a pet) and decides to sue.[5] In many cases, this protection can extend to cover losses caused on another person's property.[6] Every policy is different; the best practice is to review each individual policy—preferably with an insurance agent—to clarify exactly what is and what is not covered.

What Other Insurance is Available?

Along with HO insurance, homeowners may want to consider the following policies:

Umbrella insurance acts as an "umbrella" to coverage under other insurance policies, like home and auto. It can provide protection in excess of the maximum HO and auto limits up to a certain cap — often $1 million or more. Umbrella insurance may come into play if the policyholder is involved in an auto accident causing serious injury or has a major liability claim on their HO insurance.[7]
Jewelry or collectible insurance tags along with an HO insurance policy to provide extra coverage for valuable jewelry or home business equipment that might not otherwise be included in the HO premium. By listing these additional items and the value of each, homeowners can rest assured that everything under their roof is covered.[8]

Every homeowner should be aware of the various options available to protect their home. This empowers homeowners to select the policy that best fits their individual needs and situation. A financial professional can help evaluate choices and determine which ones provide the most value.

Important Disclosures:

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

¹https://www.streetdirectory.com/travel_guide/149516/investment/is_your_home_your_biggest_investment_ever_probably.html

²https://www.forbes.com/advisor/homeowners-insurance/new-homebuyers/

https://www.forbes.com/advisor/homeowners-insurance/new-homebuyers/

https://www.investopedia.com/insurance/homeowners-insurance-guide/

[1]What is covered by standard homeowners insurance? | III

[2]What is covered by standard homeowners insurance? | III

[3]Landslide insurance | Washington state Office of the Insurance Commissioner

[4]What is covered by standard homeowners insurance? | III

[5]Homeowners Insurance Guide.pdf (pa.gov)