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Home insurance isn’t an option — it’s a necessity. Nearly all mortgage lenders require borrowers to purchase homeowners insurance before financing a residential real estate transaction.

FOX Business | By Josephine Nesbit | Published April 27, 2021 3:23 pm EDT

Insurance can be complicated. Homeowners need to be prepared and make sure they are adequately insured. Here’s a buyer’s guide for first-time homeowners on the basics of home insurance and finding the plan that offers the right insurance coverage for you.

What should I look for when buying home insurance?

Buyers can adjust their insurance policy to fit their insurance coverage needs. When buying homeowners insurance, you should have enough coverage to:

Rebuild your home
Replace your personal belongings
Cover injuries and damages that occur on your property
Pay your living expenses if your house is uninhabitable

What does home insurance cover?

Here are the different types of coverage from a standard home insurance policy:

1. Dwelling

Dwelling coverage helps rebuild or repair the home’s structure if damaged by a covered event. Dwelling coverage should equal the cost to replace your home. This can be calculated by speaking with an insurance agent or an appraiser.

2. Personal property

This applies to everything in your home besides the structure itself if your personal belongings are destroyed, vandalized, or stolen.

You should have enough coverage to replace all of your belongings. This can be calculated by keeping a home inventory of everything you own and their actual cash value. More expensive items may also require additional coverage.

3. Liability

Liability coverage covers you against lawsuits for injury or property damage caused by you, family members, or pets to other people. Common liability claims include: