Insurance requires you to think about bad occurrences: medical problems, car accidents, emergency home repairs, and it’s important to protect yourself from some of life’s biggest surprises. When it comes to protecting your home, it’s not just about safeguarding against structural damage or theft – it’s just as much about understanding your homeowners insurance policy and feeling secure in where you live. If disaster strikes, your focus should be on reclaiming your sense of stability. The last thing you should worry about is money.
Know the Exact Value of Your Home
One of the most important things to understand from the very beginning is how much insurance you’ll need. First you’ll need to know the actual value of your home. If your home is damaged or destroyed, you’re going to need to know what it will cost to replace the entire structure… or that portion of the structure which is damaged. A home builder or assessment company should be able to give you the truest value. This is not a time to guess. Establishing your home’s value is not a do-it-yourself project. Nor is it a good idea to allow your insurance agent to be the one to solely establish that value. Again, this is your biggest asset and you’ll want to be sure you’ve got the fairest value.
Replacement Coverage Versus Market Value
There are two key distinctions that every homeowner should know: “replacement cost” versus “market value.” Replacement cost covers repairing or replacing your entire home. Market value is how much someone would pay to buy your home and accompanying land in its current downtrodden condition. When you’re considering the type of coverage to take out, a policy that’s based on market value is typically less expensive but a cash-strapped homeowner, buying a policy based on market value offers the best chance to recoup at least partial expenses after a loss. In other words, you won’t recoup as much in the event of a serious disaster. For those who have a good emergency fund in place, there is a way to possibly get more substantial coverage and still pay lower premiums: You might consider getting a policy that covers more in terms of replacing or rebuilding your property, but with a higher deductible.
What the Policy Covers
A typical policy will pay for damage to your property and your possessions in the event of certain storms, fire, theft or vandalism. It also provides liability coverage if someone gets hurt on your property and decides to sue. Homeowners insurance also covers shelter costs, so you don’t have to face crazy hotel bills if you’re temporarily displaced from your house and belongings outside the home can be covered as well.
What it Doesn’t Cover
A standard policy has exclusions including earth movements (landslides, earthquakes, sinkholes), power failure, nuclear hazard, faulty zoning, bad repair or workmanship, defective maintenance and flooding. Windstorms are typically covered, including tornadoes, although insurance companies exclude tornadoes or hurricanes in some high-risk areas. Water damage is tricky. As a rule of thumb, water from above (rainwater or a burst pipe) is usually covered, but water from below (backed-up sewers or ground flooding) may not be. However, there may be supplemental coverage available.
Bundling Can Save Money
One way to save money is to bundle your homeowner’s insurance with other policies that you already own. It makes sense to have your car and homeowner’s policies with the same company because you’ll usually get some kind of discount. However, if you don’t have a need for life insurance, don’t buy a policy just because the agent says you’ll save money on other policies. After all, if you’re spending money on something that you don’t need, where’s the savings?
What You Can Do to Reduce Premiums
While there are tons of risk factors that can drive up the cost of your home insurance premium, there are also many factors that can save you money on your policy, too. It’s important to know this so that you get all the discounts available to you. For instance some things that might earn you a discount include:
- A home burglary alarm system
- Dead bolt locks
- Fire alarms and sprinklers
- Updated heating systems
- Updated wiring and electrical system for the home
- A home near a fire hydrant or fire department
- A home located near a police department
- Well-structured and maintained stairs, sidewalks, driveways, and entrances (less chance of injury), etc.
Anything you can think of that might make your home safer, and less likely to catch fire or injure a guest or passerby can give you a discount on your premium. Furthermore, having good credit can save you money as well.
Don’t Wait to File a Claim
When buying a policy, make sure to ask about time limits to report a claim, and then abide by them! If you wait too long, you may not be eligible for benefits – especially if waiting has made the problem worse.
Write Everything Down
Don’t run the risk of submitting an invalid claim because you failed to keep proper records. Document everything that occurs during a loss. In addition to saving receipts, contracts and appraisals, document phone calls by writing down who you spoke to and when. And be sure to stow it in a secure place! Don’t want to invest in a safe? Consider keeping digital copies online using cloud services.
How Jewelry Is Covered
When signing up for homeowner’s insurance, note the limits on jewelry. Most people don’t realize that things like wedding rings aren’t usually covered by the basic limits in their policies, You can get an appraisal at your jeweler, and then consider buying a supplemental policy to cover it.
Good Maintenance Matters
Insurance companies would rather pay as little as possible to repair damage, so they value early detection and prevention. Hiring professionals to do routine check-ups and maintenance to heating, cooling and plumbing systems can uncover issues and prevent larger problems in the future. Keep an eye out and be diligent.
When to File a Claim
Don’t assume you can’t file. Contact your insurance agent. The obvious mishaps aside (fire, major flood, etc.), it can be beneficial to file a claim when in doubt, but exercise restraint. Don’t file a bunch of frivolous claims. Your claims history is also what determines your rates, so it’s better not to cry wolf, unless you have a real claim. The repercussion if you file needlessly? A possible uptick in your premium.
So there you go. These are some basic things that you’ll want to think about when it comes to home insurance.