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Buying homeowner’s insurance is so much more than just filling in the paperwork and signing above the dotted lines. There are a lot of considerations that should go into making the decision — if you want to end up with the right policy, that is.
It doesn’t matter if you’re a first-time home buyer or someone that has previously purchased home insurance; discussing these points with your insurance agent will help ensure that you get the level of coverage and protection that you need.
How much home insurance do I need?
Some homeowners purchase home insurance for the sake of compliance, without even knowing if they’re buying the right amount of coverage or not. You don’t want to buy too much or too little insurance — either way, you could be on the losing end of the deal. Make sure you have enough coverage to keep your home protected.
You can insure your home for its actual cash value or replacement cost value. An actual cash value policy factors in the depreciation cost of your home into the claim payout, which means you need to pay the deductible + shell out money out-of-pocket for the repairs/restoration. With a replacement cost policy, you’ll only have to compensate for the deductible to restore your home to its former glory.
What does my homeowners’ policy cover?
Standard home insurance policies come with four main types of coverage:
1. The dwelling coverage, which protects the structure of your home from specific types of perils, including damages due to fire, explosion, smoke, and vandalism.
2. A personal property coverage, which covers the repair/replacement of your personal belongings in case of loss, theft, or vandalism.
3. A liability coverage, which should take care of the legal and medical expenses (either in part or in full) arising from 3rd party injuries in your home or if you have inflicted damage on other people’s property.
4. An additional living expenses (ADL) coverage, which will cover your temporary living expenses while your home is under repair after sustaining serious damage from a covered peril.
Insurance companies typically offer additional coverages and endorsements that you can add to your core policy to increase its coverage. Discuss these options with your agent.
Am I covered for all types of damages and disasters?
Your standard homeowner’s insurance will protect you from most common perils, but policies typically exclude coverage for floods and other natural disasters, like earthquakes. Damages resulting from war, nuclear explosion, and power failures may also not be covered.
If you live in a flood-prone or earthquake-prone area, it should be in your best interest to add a flood or earthquake coverage to your portfolio for an extra layer of protection. Ask your agent if a flood or earthquake insurance would be necessary.
What if someone gets injured in my home?
Your personal liability protection coverage should kick-in in case of an injury in your property. It will pay for the medical expenses and legal bills and damages (if you are sued), but only up to the amount specified in your policy.
Standard homeowner’s insurance typically includes $100,000 worth of liability coverage but you may raise this if you think you need more. You’ll want to make sure you’re fully covered in case of accidents and injuries in your home. Your agent can help you determine the right amount of liability insurance to purchase.
How can I reduce my monthly premiums?
Opting for a higher deductible is the easiest way to cut the cost of your monthly premium, but it means you’ll have to pay more money out-of-pocket in the event of a claim. You may also further reduce the amount of your insurance policy by taking advantage of credits and discounts offered by insurance companies.
Most insurance providers give insurance credits to students, non-smokers, retirees, etc. They also offer a multi-policy discount to those who purchase more than one policy from them, for example: auto insurance and home insurance. One advantage of bundling your policies is that you only have to deal with one insurer for your insurance needs.
Insurance companies don’t usually advertise their discount offers, so make sure to ask your agent if you qualify for any.