A good homeowners insurance policy may be the most important thing you never use. Some people go their entire lives without filing a claim, while others can tell you from personal experience how valuable a good policy can be in the event of a total loss. Whether you’re shopping for a new policy on your first home or you’re considering making a change to your current coverage, take the time to do your research and decide what you need, and don’t need, from your policy.
Quality Customer Service is Key
Resist the temptation to focus exclusively on price, and don’t automatically go with the cheapest policy you can find without doing plenty of research. Ask neighbors, friends and family members for recommendations, especially if anyone you know has recently filed a claim. Read online reviews as well, and keep in mind that you may need to pay a little bit more for the ease and quality of service you will need should you ever have to file a claim.
Select the Coverage Level that is Right for You
Many people think they should select a coverage amount equal to the price they paid for their home. However, the cost to rebuild can be much higher or lower than what you paid. Several factors affect this, from changing building codes, fluctuating construction costs and changing land values. You will also need to make sure that your belongings are also covered in the event of a total loss. At the same time, you don’t want to may for more coverage than you need. Let your insurance agent advise you about the level of coverage to fit your needs.
Also keep in mind the difference between “replacement cost” and “actual cash value.” If you lose an 8 year old sofa to flood damage, replacement cost coverage will give you the money to purchase a new similar sofa at today’s prices. Actual cash value coverage on the other hand will pay you only the depreciated value of the now aged sofa that you lost, leaving you to pony up the rest of the money to purchase a new one. Replacement cost policies usually require a larger annual premium, so compare both options to decide which is the better fit for you.
Additional Coverage Options
Depending on where you live, adding additional coverage options to your policy might be a wise choice. For example, flooding is the most frequently occurring natural hazard, and even houses that are located outside of flood zones account for a large percentage of insurance payouts. So even if you aren’t located in a flood zone, additional flood coverage may be the way to go. Another potential coverage gap involves the items inside your home. Expensive items like jewelry, furs, artwork and collectibles may not be fully covered by standard policies. A separate additional policy would be needed to cover the full value of these special items.
Ways to Save
The higher your policy’s deductible, the lower your premiums will be. If you feel like you are better able to afford a higher out-of-pocket payment in the event of a claim, you can save money with a higher deductible.
Another way to save could be by combining your home, automobile, and any other policies into a bundled policy with one insurer. Some insurers offer additional benefits with bundled policies, such as a single deductible if property insured by multiple policies is damaged. For instance, if a fire destroys your home and your car, you may only have to pay one of the two deductibles. Bundling your policies can also make the payment and renewal processes more convenient.
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