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A Homeowner’s Guide to Choosing the Right Home Insurance

Written by Posted On Monday, 16 September 2019 15:12

In a world where anything can happen, homeowners insurance is the financial safety net you need to protect one of your most significant investments – your home.

The thing is, far too many homeowners simply sign away without putting much thought about the details – until the worst happens. Imagine making insurance payments for years on end, only to find out that your coverage is not enough to cover your losses. 

You need to pay more attention to what goes into your policies to avoid getting yourself into insurance predicaments when filing for claims.

This guide will help you choose the right home insurance coverage, so you get the full value out of your premiums.

Find out what’s covered – and what’s not.

Home insurance coverage typically includes the structure of your home and your personal belongings. Often, it also comes with liability insurance that protects your interests against lawsuits for 3rd party injuries and damage to other people’s property.

In the event that a disaster rendered your home unlivable, your policy may also cover your temporary dwelling and living expenses. 

Most homeowners insurance policies provide protection against fire, wind, and hail. Losses from theft and vandalism may be included too but in varying degrees. Your policy copy will usually contain a list of the covered perils.

Note, though, that damages from earthquake and flooding are excluded from most homeowners policy. You can, however, purchase them separately. If you're living in an area that experiences plenty of flooding or prone to earthquake, consider getting covered for those perils as well.

Determine how much coverage you need.

You have two options to choose from when deciding how much coverage is necessary – the replacement cost or the actual cash value.

The replacement cost coverage pays you the amount required to replace the lost or damaged item with the same one. It does not take into account the depreciation value, which is why it is more expensive.

The actual cash value, on the other hand, will reimburse you based on the depreciated amount of the lost or damaged item. While ACV is cheaper, it offers less coverage.

Though it's going to cost you more, insure your home - and maybe some of your most precious belongings – for their replacement value. When your home gets damaged or destroyed, you'll want your insurance coverage to take care of all the repair and building expenses. In a few years, it'll cost more to rebuild your home because of inflation.

Understand deductibles.

Your home insurance includes a deductible – the amount deducted from your property damage claims. While you can set a different deductible for every type of claim, you may also opt for an all-peril deductible that applies to multiple incidents, no matter the severity. 

Your insurer will take out the deductible amount every time you get paid for a claim. Most insurance policies have a deductible of $500 - $1000. If your claim amounts to $5000 and your deductible is $500, only $4500 will be issued for payment, and you'll have to take care of the rest.

A higher deductible will reduce your premium, but you’ll get less when you file for a claim. Inversely, a lower deductible means you’ll pay more in premium, but also get higher claims.

Choose a reliable insurance provider.

Your entire insurance and claims experience is determined by the insurer you choose. That said, you must carefully select your insurance provider.

As with any important purchase, the idea is to get the best possible premium. The key to that is having plenty of providers to choose from, so you can compare their quotes, their policies, and their customer service. 

While the lowest premium can be too tempting, you have to look at the bigger picture and not just the price. The right type and amount of coverage will keep a roof over your head, no matter what the future brings.

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Rachael Harper

Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a home insurance and wealth management firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.

https://www.bennettandporter.com/

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