Your home is probably the single most expensive investment your will ever make during your lifetime. If you own your home outright, you simply must get home owner insurance. Imagine if your house is worth $500,000 or $100,000 and it burns to the ground. If you don’t have insurance for the house, you are out in the street with no place to live and you are out the value of the house. If you have a mortgage on your home, the mortgage company will require that you have homeowner’s insurance to protect their investment of lending you the money for the house.
If you own your home, you simply must get homeowner insurance to protect your investment when an unforeseen event happens. A typical homeowner insurance policy will cover you against most cause of damages, both man-made and natural, to your house. In order to properly protect your home, the right limits, and type, of insurance coverage is very important. Otherwise, you may find yourself with too little insurance or coverage or no insurance at all for due to a loss that does not apply. Take the time to read and fully understand what an insurance policy covers and what it does not cover.
Here are a few tips that can help you pick a homeowner’s insurance policy that makes financial sense:
Know what the policy covers. Typically, a homeowner policy insures the dwelling, other structures on the lot, and the contents in those structures, such as furniture, jewelry, computers hardware and software, dinnerware, clothing, and other personal property.
The policy will usually cover damages due to fire and smoke, theft, certain damages due to water, vandalism, and personal liability claims as a result of injury and medical payments to visitors who are injured on the property.
Most basic policies will probably not cover damages due to earthquakes, floods, mold, and normal wear and tear. Most home insurance companies offer earthquake and flood coverage along with other protections, but as a separate coverage for additional premiums.
If you are unsure of the coverage, ask the insurance agent to explain the particular coverage that you are not sure of and ask for example of events that may not be covered under the policy and don’t sign the contract until you fully understand it.
Compare insurance companies. Shop around for the best policy for the premium that you will be paying. Get homeowner insurance quotes from at least three insurance companies. But don’t buy a policy based on price alone. Make sure that the insurance company has a track record of good customer service, such as timely resolution of claims, in the event you need to make a claim.
Determine how much insurance to buy.
Coverage for property – Use cost replacement estimates as your guide to the amount of insurance you need for your home. A replacement cost coverage takes into account the estimated construction cost to rebuild the house. The amount of coverage factors in possible inflation or the increase in the cost of building material and labor. The insurance agent will be able to do the calculation for you. Don’t include the value of the land that the house sits on in deciding how much coverage to buy.
Coverage for liability – It is common to see $100,000/$300,000 as a standard coverage for liability, but the additional premium to increase the limits to $250,000/$500,000 is about $2.00 more a month. Depending on your other asset you own and your financial worth, you may want buy an excess liability or “umbrella” policy with a limit of up to a million dollars. The premium is only a few hundreds dollars per year and is well worth the peace of mind. The excess policy usually also provide protection above your auto liability insurance policy limits.
Buy additional coverage with riders. Also think about buying a rider to tack on to your insurance, such as paying for your living expenses in a hotel while you wait for your home to be repaired or rebuild should the worst happen. You may also want to buy riders for expensive jewelry, antiques and collectibles with values exceeding the standard policy limits.
Deductibles. If you want to save some money on your home insurance policy, you may want to think about setting a higher deductible. Typically, home insurance companies will start giving discounts at a $500 deductible and increase the discount as your deductible increases. However, many mortgage lenders will not allow you to take on too much risk by exceeding a certain deductible, such as $1,000; so discuss the issue with your home mortgage holder before buying a policy with a higher deductible.
Secure your home – A less risky way to save some money on your homeowner insurance policy is to install an alarm system that is monitored by a central station. Security companies such as Brinks and ADT offer this kind of services for a monthly fee. The saving on your premium could be as much as 10%.
Some companies offer a modest discount for installing smoke detectors, burglar alarms and dead-bolt locks.
Multi-policy discount – The most common discount offer by home insurance companies the multi-policy discount. You will get a discount on your premiums on your home, auto and umbrella policies with the same company. Some companies will reduce your premium by as much as 15% if you have at least two policies from them. However, the discounts differ from company to company, so it’s best to shop around to see if the savings are big enough for you to buy all your policies from one company.
Senior discount – Companies will have some type of discount if you are over the age of 50 or 55. Different companies have different names for age preference policies, from senior discount to mature policyholder discount.
Association discount – You may be able to get additional group insurance discounts for being a member of a business group or professional association. Your insurance company may even offer a discount to certain large employer.
Loyalty discount – Many companies offer discounts for longer-term customers. But do comparison shop once in awhile and get some homeowner insurance quotes to make sure you are not over paying for your house insurance.
Know your rights and obligations. Read and understand the rights and obligations of the insurer under the terms of the policy and your rights and obligations under the terms of the policy. When you get a copy of your home owner’s policy, read over everything to make sure that the coverage, premiums, limits, and all other information is correct before you file the policy away in a safe place. Keep a copy of all signed documents relating to your policy for your records. Put them in a safe place away from your home such as a bank safe deposit box. Keep an updated and accurate inventory of your personal possessions in your home – keep receipts and a list of your possessions with descriptions, dates of purchase and purchase prices; take pictures, or better yet, videos tape each room and closet in your home. Keep your inventory records in a safe place away from your home, and update your inventory and records on a regularly.
Review Your Policies. Review your homeowner policy at least every three years and take into consideration any changes in your needs, any changes to the value of your possessions and market value of your home. Notify your insurance agent about any changes that may impact the insurance policy’s coverage. Drop coverages you don’t need and add to coverages that you may need.