Purchasing your first home also means it's time to secure your first home insurance policy. If you are familiar with renter's insurance, then you know that homeowner's insurance will protect the contents of your property. Unlike renter's insurance, it will also cover damage to the actual property and cover any liability if someone gets hurt on your property. The following guide will further help you understand your first homeowner's policy.

Insurance payments are usually paid to the mortgage holder

Unlike other types of insurance, homeowner's insurance isn't usually paid directly if you have a mortgage out on the home. Instead, it is rolled into your mortgage payment by your lender. This way your lender can ensure that the policy is always up to date and that their investment is protected. The yearly premium will be divided up by your mortgage payment and you will pay a portion of it each month. This portion sits in an escrow account with your mortgage company until it is time for them to withdraw it an pay the policy.

There are several levels of coverage to choose from

Homeowner's policies don't necessarily cover everything, so it's vital that you know your level of coverage. Standard policies may cover fire and flooding from items like broken pipes, but they may not protect against earthquake or natural flood damage. In this case, you may need to get a higher level of coverage or get additional coverage. For example, if you buy a home in a wildfire prone area, you may need to add wildfire coverage to your policy. Read through all the fine print and make sure that the coverage you are purchasing matches the common perils of your area.

The value of your home may not equal the replacement cost

The value of your home, for the insurance company, may far fall less than what it would actually cost to rebuild in the event your home was a total loss due to fire or another disaster. This is because there is the additional cost of razing the old home, along with rebuilding it from scratch. Fortunately, you can insure replacement cost instead of the home value. This can be a lifesaver for the new homeowner, since you may not have enough saved up since your purchase to cover the extra if disaster did strike.

Verify that you have sufficient contents coverage

One thing commonly overlooked when you get your first policy is the amount of the contents coverage. Most standard policies also come with a standardized amount. This amount may be plenty if you own average items—clothing, housewares, a few major electronics. On the other hand, if you have pricey items or collectibles, such as a home recording studio or a collection of fine jewelry, then the contents coverage may not be sufficient and you may want to consider purchasing additional coverage.

For more information, contact agencies like Callis & Associates.