You need a homeowners insurance policy not just to protect yourself from permanent damages to your property but also to cover additional costs you may have to incur on repair or replacement in case the need arises. The scope of protection you require has to be weighed against the recurring cost of keeping your policy “live.”
It therefore boils down to tight-rope walking. You want adequate cover without letting your household budget go haywire as a result of the hefty insurance premium you have to shell out at regular intervals to maintain your policy.
An important point to keep in mind is that you have to insure your home for at least 80 percent of its replacement value or your claim will not be settled on a replacement-cost basis. It is advisable to regularly review your policy to ensure that you have adequate insurance coverage.
POINTS TO NOTE
*Your policy type and the risks covered
These risks or “perils” are fire, theft, hail or thunderstorm. The perils that are normally covered under a basic home insurance policy are fire, lightning and internal explosions. You might need coverage for special features like premium flooring or costly furniture or fixtures. Check with your insurance agent to find out the best comparative coverage available.
*Building prices in your area
Check the prevailing prices of buildings in your area. This is a vital component of your coverage besides your personal assets. Make sure your policy provides you protection against inflation, because the cost of repair/renovation would depend on prices of building materials, which could go up with inflation.
*Assess your personal property on a regular basis
If you have valuables like cash, jewelry, valuable papers or securities, electronic gadgets, you can get additional coverage from a personal articles floater policy, which is in addition to the coverage provided by your basic policy.
*Make sure remodeling/renovation project costs are insured
If you have undertaken a remodeling of your home or are planning renovation/repairs in the future, discuss it with your agent to get an estimate of the insurance costs involved in risk coverage.
*Check what additional coverage is available
For instance, you might want insurance for assets used for your home business like computers and computer peripherals.
DEDUCTIBLES AND DISCOUNTS
Insurance companies offer a standard all-peril deductible clause which reduces your insurance cost. For example, if the damage caused by fire is $10,000 and the deductible is $5,000, you are responsible for the first $5,000 and the insurer is responsible for the balance of $5,000.
Check with your agent or the insurance company on the premium discounts available. If you have installed security devices at your home such as fire alarms and security systems, you are entitled to discounts. Some companies even offer multi-policy discounts. Purchase of more than one policy from a company like health insurance or auto liability insurance over and above the homeowners insurance policy may entitle you to a small discount.
Your objective of insuring your home property is best achieved when you have extensive coverage for not only your home but also personal property, loss due to theft of valuables and bank deposits and third party injury risk and at the best possible price.