By Aly Yale
Did you buy a house during the pandemic? Make sure it’s properly protected.
The entire economy ground to a halt last spring as coronavirus lockdowns shuttered businesses, closed offices and forced millions of Americans to shelter in place. As a result, the housing market faltered too.
That slowdown was only temporary though, and by late May, homebuying demand had surged. Desperate to leave more cramped, urban areas — and not to mention quarantine in larger, more spacious properties — consumers across the country bought up homes at record speeds, resulting in the lowest levels of for-sale housing in history.
Demand was so strong it sent home prices up as well. In the third quarter of the year, the median sales price of a U.S. home was $324,900. And according to the Federal Housing Finance Agency, prices are up 10% over the year.
For most people, that’s a pretty large price tag — and likely the biggest purchase of their lives. If you were one of the many who purchased a home during the COVID-19 pandemic (or are planning to soon), make sure you protect this massive investment with adequate homeowners insurance.
Homeowners insurance is a type of insurance policy that covers damage to your home and accidents that occur on your property. There are also types of homeowners policies that cover damage suffered due to natural disasters, like flooding, earthquakes, hurricanes and more.
To purchase homeowners insurance, you can go through any insurance carrier or agency.
In many cases, homeowners insurance is required. If you used a mortgage loan to purchase your property, then your lender will no doubt require a policy before you close on the home. This is to ensure the lender can always recoup their money should you fail to make your payments.
More than this though, homeowners insurance is a way to protect your investment — and your pocketbook — in case the unexpected happens. If your home suffers damage, is burglarized or vandalized or someone is hurt on the property, your insurance can cover the costs to repair or remedy the situation, lightening the financial burden it causes your household.
“The most significant investment most people will ever make is their home,” said Sylvester Mathis, chief insurance officer at Insurity. “Without homeowners insurance, most Americans would be incapable of replacing their homes in the event of a total loss. That represents a tremendous risk. Homeowners insurance transfers the homeowner’s economic risk to the insurance carrier.”
Homeowners insurance generally covers three categories:
“Your most basic homeowners policies cover damage to the house caused by fire, vandalism, hurricane, lightning or other specifically covered events,” Mathis said. “Homeowners policies also cover loss or damage to personal property due to theft.”
If you have high-value items in your home, like jewelry, art, musical instruments or collectibles, you can usually purchase extra coverage to ensure these are protected as well.
“Policies also cover liability up to certain limits, protecting the insured homeowner if someone injures himself on the property,” Mathis said. “In addition to the liability coverage, homeowners insurance pays for costs if someone sues the homeowner.”
Homeowners who live in areas prone to flooding or earthquakes may need to purchase separate policies to cover damage from these events. In fact, your mortgage lender may require earthquake or flood coverage before you can purchase your house.
To get the right policy, you first need to determine what coverage you’ll need. According to Mathis, this means taking stock of your personal property (and its value), as well as how much risk you’re at. Understanding what sort of deductible you can afford is important, too.
“Once you understand the policy best suited for you, comparison shop, create a list of comparable policies, or ask an agent or broker to provide at least three policies for comparison,” Mathis said. “Finally, don’t sign up based solely on price — that could cost more than the premium in the end.”