About to buy your first home? That means it will also be your first time purchasing a home insurance policy. This coverage gives you protection against disasters—such as a fire or vandalism—in exchange for an affordable monthly premium. However, like any legally binding agreement, some of the clauses may be confusing without knowing the proper terminology. The guide below explores some of the terms you are likely to see.

What Common Insurance Terms Should Homebuyers Be Familiar With?

1. Depreciation

This refers to the decrease in a property’s value over time. Depreciation can occur at an accelerated pace if the wear and tear to the house are excessive. For example, if an owner fails to undertake maintenance of fixtures and appliances, the home’s worth may suffer. That’s why you should make a point of keeping all receipts for inspections and repairs the property receives to help justify any potential claims.

2. Liability Coverage

Along with protecting your home and its belongings, home insurance also protects you. It does this through liability coverage, which safeguards you against legal claims if a person is injured on or because of your property. For instance, if a person falls at your home and requires medical care, liability insurance provides funds for treatment, as well as any subsequent court cases. 

3. Dwelling Policy

While home insurance policies include liability coverage, dwelling policies do not. In this case, dwelling coverage only protects the home and personal property. While this may be less expensive, going without liability coverage can be risky. 

4. Endorsement

Also known as a rider, an endorsement extends your existing insurance coverage. An endorsement can increase coverage limits or cover incidents that are not listed in the existing policy—such as flood insurance.

5. Replacement Cost

Replacement cost is the funding necessary to replace a home or belongings with a brand new version. This is in contrast to actual cash value policies, which will pay you the value of the item but minus any depreciation that may have occurred. However, if replacement cost exceeds the limit on your policy, you’ll only receive the latter amount.

Shopping around for a home insurance policy to protect your new investment? Doris Watson Insurance Agency goes above and beyond when counseling clients in Broken Arrow, OK. State Farm® Insurance agent Doris Watson will be happy to sit down with you and discuss your needs. She can also help you determine whether you need an endorsement or rider on your existing policy. Call (918) 251-4333 or contact her on Facebook to ask questions about this or other available products.