Choosing the Right Homeowners Insurance

There are very few products we buy and hope we never have to use. Homeowners insurance just happens to be one of those purchases. Because of this, it may be tempting to buy the cheapest policy instead of the right policy for your home.

However, should you ever need to rely on your homeowner’s insurance, the cheapest rarely will be sufficient to make you and your family whole. Consider the factors below next time you shop for homeowners insurance.

Dwelling Coverage

Homeowners insurance provides coverage for the residence you live in. Insurance policies use the term “dwelling” to describe your home. Homeowners insurance policy will pay for damage caused by a multitude of perils unless otherwise excluded.

Common perils excluded from coverage include:

• Flood
• Wildfires
• Hurricanes
• Earthquake
• Equipment breakdown
• Back up of sewer or drains
• Ordinance or law / code coverage

Insurance companies offer endorsements to add excluded perils onto a policy for an additional premium, usually with their own deductible and limits of coverage. If you have freestanding structures such as a shed, carport, or detached garage, you will also want to make sure your policy extends coverage for those buildings as well.

How much you will receive in the event of a claim will depend on two factors.

1. Valuation – Policies will pay for damage or replacement using either replacement cost or actual cash valuation methods. Actual cash value pays only the cost after subtracting depreciation. This means the older your home, the less you would receive with actual cash value. Agents commonly recommend adding guaranteed cost coverage to pay for potential increases to costs and labor.
2. Deductible – Deductibles come in two forms. Flat dollar deductibles are common for most perils and can range between $500 and $10,000 for most policies. Percentage deductibles require you to pay a percentage of the limit of insurance (not the amount of damage). Your deductible will be subtracted from your total claim amount.

A common mistake when purchasing homeowners insurance is determining how much coverage to buy. Purchasing an amount equal to your mortgage will leave you underinsured in the event of a large loss. On the other hand, insuring to market value instead of the cost rebuild may result in over-insuring your home. Your insurance agent has access to replacement cost calculators that can dial in the near exact amount of insurance you need.

Personal Contents

We have more things than most of us can remember. While most insurance policies will provide personal contents coverage equal to 50% of the dwelling limit, it is recommended to take an inventory of your personal items.

Personal contents coverage includes everything from clothing to furniture, toys to technology. However, there are certain items which may be excluded from coverage under the policy or be limited to a lesser amount of coverage such as:

• Jewelry
• Artwork
• Collectibles
• Power tools
• Designer clothing

Riders can be added to your policy to provide sufficient coverage for special items. Also, be aware the breakdown of appliances is not covered under a homeowner policy. Although more insurance companies are offering this additional coverage.

Personal Liability

Property damage is what most people think of when it comes to homeowners insurance. But your liability as a homeowner is a significant exposure you carry. Homeowners insurance policies provide liability coverage in the event someone is injured on your property or suffers property damage at your home due to your negligence.

It is important to know certain liability exposures may not be covered by your insurance policy. For example, there are a handful of dog breeds some insurance companies will not cover. Additionally, criminal or wanton actions that result in injury or property damage will also likely be excluded from coverage.

Loss of Use

In the unfortunate event your home becomes uninhabitable due to damage or destruction, your homeowner’s insurance policy can reimburse you for costs associated with hotel stays, meals, and travel. Make sure to review your options for loss of use coverage as the daily available limit and the duration of coverage can be increased or decreased to meet your needs.

How to Save On Homeowners Insurance

Armed with the factors to look for when purchasing homeowners insurance, it is also helpful to know a way to save on your premiums. The most common premium savings tactics include:

• Increasing your insurance policy’s deductibles
• Installing an insurance company approved security system
• Bundling homeowners coverage with other insurance policies

The most effective way to obtain the right coverage at the most competitive premium is to work with an independent insurance agent. As an independent insurance agency, we have access to many different insurers who compete for your business. Contact us today to review your Homeowners Insurance options.