How to choose the right home insurance for your first house
Home insurance is an essential cost you should factor in when purchasing your first house. Here’s everything you need to know about finding the right home insurance.
There are few things more exciting than finally closing the deal on your first house. All of the stress of finding the right mortgage, looking through hundreds of listings, and then sending in your application on your dream home in the hopes of rising above the competition has all led to this moment: the keys to your very own home.
But now, as a smart and savvy new homeowner, you probably know that it’s vital to get home insurance in order to ensure that all of your hard work isn’t in vain when an accident happens and you’re left sitting with a large bill. But with so many different types of insurance policies out there, which one’s right for you? We’ve compiled a guide to help you choose the right insurance for your first home.
Assess what coverage you need
One of the key aspects insurance providers will take into account when determining the rate you’ll need to pay is how much they’d actually need to cover in case you lost everything. That means determining the total value of all of your belongings and the cost of rebuilding your home. If you own very expensive things, such as valuable jewelry, furniture, or electronics, the type of coverage you need may be more extensive.
You’ll also need to think about the conditions where you live and what kind of risks your home may be exposed to. If you live close to the shore, or in areas prone to flooding, or in a wooded area that’s known to experience wildfires in the summer, then you may need to factor those risks into your policy and potentially splurge for additional coverage.
Basic versus Comprehensive Coverage
When it comes to home insurance in Québec, there are generally two types: Basic and Comprehensive. Basic coverage only covers events that are specifically named in the policy. So if you’re looking at a basic coverage policy that covers theft, vandalism, wind, and fire damage but nothing else, then that’s all you’re getting. If a pipe in your home suddenly bursts and floods your basement, but it’s not named in your coverage, then you’re stuck paying for that damage out of your own pocket.
A comprehensive coverage, on the other hand, covers everything except events that are specifically excluded from the coverage. So by default, if your policy specifically singles out flood damage or damage caused by wild animals, you can expect any other type of damage apart from those named to be covered. What you end up choosing depends on your needs. Basic policies tend to have lower rates, and if you find a policy that covers most of the things you’re worried about, then go for it. But if you want to be more cautious and don’t mind paying a bit more in order to have more peace of mind, then a comprehensive coverage might be better for you.
Choose replacement value over cash value compensation
Many home insurance policies will give you the choice between cash value or replacement value compensation in the event that your personal items are damaged or lost. Cash value means you get a cash compensation in the amount of the item’s value at the time you purchased it. So if you bought a television for $1,000 a couple of years ago, then you’ll get $1,000.
Replacement value, however, compensates you for the amount it would cost to replace the item with an identical one, right now. Due to inflation, there’s a high chance the identical item now costs more than when you initially bought it. So if that same television you bought a couple of years ago now costs $1,300, you’d receive $1,300.
Choose your liability coverage
Do you have pets, such as a dog, or small children? Then you may have to consider choosing a higher liability coverage, since pets and children can often cause more unintentional damage. Imagine your dog bites a guest in your home or your child destroys school property. You’re going to want to be covered in case accidents happen.
If you live alone or with just a partner, then you might find that a lower liability coverage is fine for you. As always, make sure to carefully read the policy to ensure what’s covered and what’s not.
Find something you can afford, but watch out for high deductibles
Buying a house isn’t cheap, and sitting on a mortgage, paying property taxes, and then having to pay high insurance rates on top of that can be a frustrating thought. While it’s important to ensure that you pick a rate you can reasonably afford, be careful of low rate/high deductible policies. While those low monthly rates can be very tempting, a high deductible you can’t really afford might end up ruining your savings when an accident does occur.
Finding that sweet spot between a monthly rate you can afford, a deductible that you can pay, and the kind of coverage that effectively insures your home and adapts to your lifestyle can take a bit of time, but it’ll be worth it.
If you’re feeling overwhelmed with finding the perfect home insurance for your first house, then you’re not alone! With just a few questions, YouSet pulls together a list of home insurance providers that meet your criteria and lets you easily compare coverage options, rates, and deductibles. We help you find the best price for the coverage that you need, and get you set up right on the spot, from the comfort of your own home. Check us out!
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