First-time homebuyers are likely to experience many surprises during the purchase process and the need for homeowners insurance is one of them. Unlike other regulatory federal or state requirements, your lender requires homeowners insurance to safeguard the investment.

The average cost of a home insurance policy lies between $700 and $1,000 depending upon your area of residence. A majority of people underestimate the importance of homeowners insurance, primarily because of the lack of awareness. Homeowners insurance is not just about dwelling coverage. It offers complete protection to your personal assets in several ways.

What does a standard homeowner insurance policy cover?

Homeowner insurance policy covers dwelling, personal possessions, personal liability, loss of use, other structures, and medical payments.

• Dwelling coverage: Under dwelling coverage, the structure of your home is covered against any damages from fire, wind, rain, and other similar natural or unnatural occurrences. You must consider an expert to know about the sufficient coverage amount and it should consider the building cost of the house instead of its current market value. Keep in mind that you will require additional cover against earthquake and floods.
• Personal possessions: Homeowners insurance covers your personal possessions under the event of loss or theft. Usually, this amount lies between 50 to 70 percent of the overall dwelling cover. If you plan to benefit from the insurance, prepare a list of your possessions along with their payment receipts. Cover for high-value items may vary depending upon the insurance company so make sure to consult an expert in the matter.
• Personal liability: Most of the people are not aware of the personal liability cover offered under the homeowners insurance. This cover protects you from any personal liabilities or lawsuits in the event of an accident. For an instance, if you dog bit a guest, the insurance will cover any lawsuit charges that you might be liable to pay.
• Medical payments: If you are lucky that the injured individual is not pressing any charges, your insurance will help you cover the medical expenses of the victim. Most of the policies have a $1,000 medical cover but you can apply for a higher limit.
• Loss of use: It is another important feature that offers eligibility to redeem hotel bills or rent that you might have to pay while your home is being repaired. This feature comes into act when your home is not suitable for living without repairs.
• Other structures: In case of a catastrophe, homeowners insurance covers other structures around your home including garage and sheds. The cover limits are roughly 10 percent of the overall dwelling coverage.