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Understanding
Homeowners Insurance
When shopping for home
insurance, there’s much more to consider than how much your
coverage will cost. You 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.
When shopping for homeowners insurance, be sure to consider the
following:
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Look for
exclusions to coverage. For example, most insurance policies do
not cover flood or earthquake damage as a standard item. These
coverages must be bought separately. |
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Look for
dollar limitations on claims. Even if you are covered for a
risk, there may a limit on how much the insurer will pay. For
example, many policies limit the amount paid for stolen jewelry
unless items are insured separately. |
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Understand
replacement cost. If your home is destroyed you'll receive money
to replace it only to the maximum of your coverage, so be sure
your insurance is sufficient. This means that if your home is
insured for $150,000 and it costs $180,000 to replace it, you'll
only receive $150,000. |
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Understand
actual cash value. If you chose not to replace your home when
it's destroyed, you'll receive replacement cost, less
depreciation. This is called actual cash value. |
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Understand
liability. Generally your homeowners insurance covers you for
accidents that happen to other people on your property,
including medical care, court costs, and awards by the court.
However, there is usually an upper limit to the amount of
coverage provided. Be sure that it's sufficient if you have
significant assets.
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these tips to lower your homeowners insurance costs: |
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Raise your
deductible. If you can afford to pay more toward a loss that
occurs, your premiums will be lower. |
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Buy your
homeowners and auto policies from the same company and you'll
usually qualify for a discount. But make sure that the savings
really yields the lowest price. |
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Make your
home less susceptible to damage. Keep roofs and drains in good
repair. Retrofit your house to protect against natural disasters
common to your area. |
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Keep your
home safer. Install smoke detectors, burglar alarms, and
dead-bolt locks. All of these will usually qualify for a
discount. |
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Be
sure you insure your house for the correct amount. Remember,
you're covering replacement cost, not market value. |
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Ask about
other discounts. For example, retirees who are home more than
working people may qualify for a discount on theft insurance. |
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Stay with
the same insurer. Especially in today's tight insurance market,
your current vendor is more likely to give you a good price. |
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See if you
belong to any groups—associations, alumni groups—that offer
lower insurance rates. |
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Review
your policy limits and the value of your home and possessions
annually. Some items depreciate and may not need as much
coverage. |
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See if
there's a government-backed insurance plan. In some high-risk
areas, such as coasts, federal or state government may back
plans to lower rates. Ask your agent. |
