Your home is the most important and largest investment you’ll make, so it only makes sense that your second most important choice is the investment you make in your homeowner’s insurance policy. While the good news is that you have many different companies to choose from, the bad news is that all policies and insurers aren’t created equal. Here is what you need to know about homeowner’s insurance.
The structure of your home.
This coverage sets the limitations on the cost to rebuild your home, brick by brick in the event of a natural disaster. Typically this coverage will even extend to detached buildings like a garage, shed or gazebo. However, this coverage does not extend to damage from normal wear and tear, flooding or earthquakes.
When selecting the amount of coverage to rebuild your home it’s a good idea to check and see whether or not your policy offers inflation protection. Without it, you might be spending a lot more to get back into your house than you did to buy it in the first place. For example:
If your home cost $100,000 to build in 2001 and it now costs $125,000 to build your home, your coverage should incorporate that inflation fee, and have it built into the policy. Not doing so could become a costly mistake.
Personal belongings such as furniture, landscaping and clothes are covered under your homeowner’s insurance policy to a degree. High dollar items such as big screen televisions or computer equipment are only covered at a small percentage of the total value, unless you purchase a floater. This additional coverage will reimburse you in the event of loss or theft of your personal items.
If you are filing an insurance claim on any personal of worth, the items claimed should have been cataloged, with photos or a video camera to prove ownership, as well as having a receipt of sale for the items. One of the most common hold ups in getting replacements or reimbursements for personal property is verifying that it was an actual item you owned.
Keep these cataloged photos or videos, outside of your home in a safety deposit box or in an offsite storage unit to have readily available should you need them.
Most of the time, the maximum liability coverage offered by a homeowner’s insurance policy is $300,000. This amount is what would be paid to a claimant in the event of a lawsuit for injury on your property. While this protection is valuable, it’s advisable to purchase additional umbrella coverage to protect your assets, since most lawsuits filed are in the $1 million dollar and above range.
Inasmuch as medical coverage, your homeowner’s insurance policy will include $1,000 – $5,000 of no fault medical coverage, which could be used by someone who was injured on your property not interested in filing a liability claim.
Additional living expenses.
Consider what it would cost to move out of your five bedrooms home into a two-bedroom apartment with 4 kids, a dog and 2 cats. The additional living expense coverage should be enough to enable you to live comfortably while your home is being repaired or rebuilt. The best way to know what to pay is to set your living expenses reimbursement cost to about 25% – 30% of your total homeowner’s insurance policy.
Bear in mind that while homeowner’s insurance policies cover most natural disasters, they don’t cover earthquakes or floods. If you live in an area that is prone to these types of natural disasters adding coverage for floods and earthquakes is a wise investment.
Purchasing a homeowner’s insurance policy from a company that you already do business with, such as a bank or even your builder is a great way to save money off of the total cost of your policy. But remember, when it comes to homeowners insurance you get what you pay for, and the cheapest policy usually isn’t the best. Talk to your Realtor and ask whom they would recommend. Protect your home, and protect yourself by making sure you get the best coverage possible.