shopping for home insurance, there’s much more to consider than how much your
coverage will cost.
need to buy the right type of policy. You need the proper level of
protection, plus special provisions for valuables such as jewelry, your computer
equipment and other possessions. You might also need additional coverage
for such things as earthquakes or flooding.
Lending institutions usually
require mortgage customers to purchase homeowners insurance. Don’t rely
on the coverage levels mandated by your bank or mortgage company. Those
levels are designed to protect the house itself, but not necessarily your
possessions. That’s why it’s important to check with your agent or
insurance company, to make sure you have adequate coverage. Always keep an
up-to-date home inventory
There are several basic
types of home insurance policies:
your house and possessions against 11 different perils.
are variations on these policies as well. For example, landlords can buy
coverage that insures only their buildings and not your personal property (which
is what a renter’s policy would cover). You can get special policies to cover
mobile homes (a.k.a. manufactured housing).
you apply for homeowner’s insurance, you’ll provide a great deal of
information. The insurance company will ask you about your current
occupation and employment history, marital status, previous addresses, date of
birth and Social Security number. The insurer will check your criminal, credit,
and insurance history to see if you are a "good risk." The insurance
company also will look at your "loss history" to see what kinds of
home insurance claims you've made in the past.
factors go into determining the premiums for a homeowner’s policy. The
age of your home, the materials used to build it, where it’s located, the
square footage, and the numbers of rooms all play a role.
do you heat your home? What’s the overall condition of the house?
How many people live in your home? How close is your home to the nearest
fire station and fire hydrant? The answers to these questions also help
determine how much you’ll pay for your homeowner’s policy.
your home is equipped with an alarm system, smoke detectors and deadbolt locks,
you could save money. Those items help make your home safer and more
secure. If you have an in-ground pool or a trampoline, you might pay
higher premiums. You can also expect to pay more if you are located in a higher
risk area, such as a coastline or a high crime area. Your insurance company will
also want to know if you plan to use the home for any business purposes, of if
you plan to rent all or part of the house, both of which can increase liability.
with all this information, insurance companies can determine how much to charge
you for insurance, sometimes in a matter of minutes.
policy dollar limits are important
you insure your house for $100,000, that's the most you will get if it is
destroyed, even if it would cost more to replace it. The Declarations Page on
the front of your policy shows how much coverage you have. Talk with your agent
or company representative if you have any questions about your insurance limits
cost coverage for your personal property
buying homeowner’s insurance, you need to understand the difference between
‘replacement cost’ and ‘actual cash value,’ Most
homeowner policies contain replacement cost coverage on the home and actual cash
value coverage on personal property.
policies automatically cover household contents - furniture, clothes,
appliances, etc. - up to 40 percent of the amount your house is insured for.
This means if you insure your house for $100,000, its contents are insured for
up to $40,000. You can get more coverage by paying a higher premium. This
automatic coverage pays only the actual cash value of damaged, stolen, or
destroyed household goods. Actual cash value is an items replacement cost, minus
depreciation. You will need to provide an inventory of your home's
cost policies give you more protection than actual cash value coverage. For
example, what happens if a burglar steals your six-year-old television set. With
actual cash value coverage, you get only what you would expect to pay for a
six-year-old television set. With replacement cost coverage, the insurance
company pays to replace your TV with a new set similar to the stolen one.
companies generally want proof you replaced an item before paying your claim in
full. An insurer might offer to replace the items instead of paying cash,
but the choice is yours.
people learn after a fire or storm they didn't have enough personal property
coverage. Taking inventory will help you decide how much insurance you need. It
also will simplify claims.
inventory should list each item, its value, and serial number. Photograph or
videotape each room, including closets, open drawers, storage buildings, and
your garage. Keep receipts for major items in a fireproof place.
other protections does my policy provide?
policies regularly provide other types of coverage, including off-premises theft
protection and unauthorized use of your credit cards. Make sure you understand
which provisions are included in the standard coverage you elect to purchase and
which might require supplemental premiums.
Homeowner’s policies cover
specific risks. Depending on what you own and where you live, you might
need to supplement your policy with special coverage.
policies do not cover flood damage. The National Flood Insurance Program (NFIP)
offers flood coverage in many areas. Local insurance agents sell NFIP flood
policies and can tell you about the program in your area.
a mortgage lender determines a home is in a special flood hazard area, the
borrower might be required to purchase flood insurance.
you are concerned about earthquakes, you can get coverage with a separate
might want more coverage for certain items than your policy provides. For an
extra premium, you might be able to buy endorsements that expand or increase the
coverage on these items. Some of the most common endorsements cover jewelry,
fine arts, camera equipment, coin or stamp collections, computer equipment, and
radio and television satellite dishes and antennas.
umbrella liability insurance
you want more liability coverage than a homeowners policy provides, you can buy
a separate umbrella policy. Because policies vary, make sure the agent or
company fully explains the coverage.
deductibles, lower premiums
Deductibles allow you to cut
the cost of your insurance, by assuming some of the risk. If you have a
$250 deductible on your homeowner’s policy, you agree to pay $250 to cover any
losses, before the insurance company pays the rest of your claim. By
increasing that deductible to $1,000, you might save 20 to 30 percent on your
premiums. You must decide whether lower deductibles or lowering your
premium is right for you.
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