Home insurance is a vital part of owning any home. Just as your car is insured against accidents, your home must also be insured against unfortunate events. When you are preparing to buy a home, here is what you should keep in mind with your homeowners insurance.
The Policies
There are different aspects of your homeowner’s insurance policy and it’s important to understand all of them. The first thing to know is that there are two different types of coverage. The policy will typically have Home Insurance Property Protection and Home Insurance Liability Protection.
Property Protection
Designed to take care of damages to the dwelling and other items on the property, this is typically broken down into four sections. Before choosing coverage levels, you should understand exactly what is being covered.
Dwelling – This insurance is for the dwelling itself. It also covers attached structures such as an attached garage or sun room and will cover the built-in appliances, air conditioner, and wiring. Be sure that your coverage is high enough to either rebuild the structure or allow you to buy another home should it be destroyed.
Other Structures – This covers you when your property has a cottage, detached garage or storage sheds. It also includes fences, driveway and even retaining walls. If the detached structure is used for business purposes, however, it will not be covered. If you build such a structure on the property after initially obtaining the insurance you will want to call the company and inform them of the addition. Consider what it would cost to replace all of those structures and be sure your coverage is adequate.
Home Contents Insurance – Also referred to as personal property coverage, this covers the items you bring into the home. Electronics, computer, furniture and other items are covered. These can be the hardest to itemize and the most difficult to remember should fire or other accident destroy your home. The best advice is to systematically go through your home taking pictures of the rooms and items.
High dollar items like jewelry, artwork and firearms may not be covered by your insurance company. Ask about a special rider for these items if you own them and are concerned about having them replaced.
Loss of Use – This is the insurance that will pay for you to live elsewhere should your house require extensive repairs or rebuilding.
Additional Property Coverages – If you have expensive landscaping, you can request coverage for the landscaping.
Home Insurance Liability Protection
This protects you from lawsuits should someone be injured while on your property. It is absolutely necessary and should not be neglected. If someone walks on the sidewalk in front of your house, trips and breaks a leg they can sue you. The closer they get to your home, the greater your liability is. It is especially a concern for homeowners that have dogs, pools or trampolines. Talk to your insurance company and let them know about the items you own that may prove to be a danger. Find out if there are additional steps you can take to help protect yourself, such as fencing in a yard with a pool or ensuring the dog is always behind a fence.
Actual Cash Value vs. Replacement Cost
It is important to know the difference between these valuation methods and verify which one you are insured for. Actual cash value will repay you the current value of any item that is damaged in a covered peril. Replacement cost will pay the amount that it will cost to actually replace the item. For example, if you have replacement cost on a 52” TV that is ten years old, then your insurance company would research the cost of TV’s being sold today and pay you that amount. If you have cash value coverage on that same TV, your insurance company would pay you only what it is actually worth, which would probably be less than $50.
Actual cash value will give you lower premiums, but it will leave you short should there ever be actual damage to your personal property. For the best protection, choose replacement cost coverage so that you can actually get items replaced and get back on your feet again.
Lowering Rates
There are ways to enjoy lower insurance rates. Talk to your company about discounts you qualify for. If you insure your car with the same carrier, that can earn you a discount. Having a home security system in place will net you discounts, as well. You can also choose a higher deductible to help bring the overall cost of insurance down. Finally, shop around to see if you can find a more attractive price from another provider.
