Your
Home...Protecting Your Most Valuable Asset
Homeowner's insurance policies can differ greatly from company to company.
It is a good idea to ask your agent or representative for a replacement
cost quote, in addition to whatever other quotes you may obtain.
Let's say that a policy covers your home for $100,000, an average policy
will then provide an additional 50 percent of that amount for your personal
property. Rounding out the picture will normally be 100,000 in liability
coverage, which protects you from lawsuits if someone is hurt on your
property or your pet hurts someone etc. Tip: The amount of liability
on your homeowner's policy can be increased to $300,000 for a relatively
inexpensive amount (a good value for the amount of extra protection
that you'll receive). This difference could be as low as $10-$12 a year.
Your policy should also have coverage for other structures such as a
garage, which will usually be an additional 10 percent of whatever your
home (or dwelling) is covered for. An average policy will provide $1,000
for emergency medical coverage, should someone get hurt on your property
and require quick medical attention. This is another coverage that can
be increased (usually up to $25,000), relatively inexpensively.
Thus, an average
homeowner's policy may include the following:
Coverage A Dwelling $100,000
Coverage B Personal Property $50,000
Coverage C Personal Liability $100,000
Coverage D Other Structures (i.e. garage etc.) $10,000
Coverage E Medical $1,000
Tip: Most homeowner's
policies will pay for your living expenses if you have to temporarily
move out of your home due to a covered loss, such as a fire, storm
damage, explosion etc. On average, you would have up to 12 months
of living expenses paid during this period. Additionally, if you rent
out a portion of your home to a tenant etc., and normally collect
rent from that tenant, after a covered loss, most policies will pay
you what you would normally (and reasonably), charge your tenant to
live in your home, should your home become inhabitable after a covered
loss.
When buying
homeowner's insurance, consider some relatively inexpensive optional
coverage(s) such as personal property replacement cost, increased
liability, and increased coverage for jewelry, watches, furs etc.
These optional coverage(s), are well worth the extra premium for the
additional protection that they provide.
Furthermore, ask your insurance agent or sales representative if water
damage coverage (such as flood insurance or sewer back up coverage)
is extra. Sewer Back Up coverage will protect your personal property,
flooring, appliances etc., from water damage backing up through the
drain opening (usually in a basement floor). Flood insurance on the
other hand, can cover damage to your home when the community is flooded,
resulting in inside and/or outside damage to your home and personal
property.
Flood insurance
is administered through the federal government, however, it should
be obtainable through many insurance representatives. Your lender
should inform you if flood insurance is required for your property
before you close on your home. Tip: Flood insurance and sewer-back
up coverage (although both protect against water damage) are two distinct
and separate types of coverage(s) and should not be confused with
one another. Please keep in mind that they are usually optional coverage(s),
and are not automatically included.
Insurance companies may offer you a quote to insure your home at full
replacement, which is good and recommended. This "replacement
cost" is the insurance company's calculated estimate of what
it would take to "replace" your home in the event of a total
loss or complete destruction of your home.
Tip : For Condo-owners who have an Association, check to see if you're
required by your Association Bylaws to cover only the interior of
your unit or the interior and exterior etc. This will determine in
great detail how your homeowner's insurance policy should be structured.
You may only be liable for your floor coverings, interior drywall
etc., or you may be responsible for your immediate exterior walls
and roof. Each association is different and your responsibility should
be made clear to you.
Furthermore, it's a good idea to mention to your insurance agent or
representative, any additional needs you may have. For example, you
may have a home based business and need certain "endorsements"
(specifically designed coverage(s) to meet a certain need), to protect
certain equipment, business personal property in your home, or you
may need increased liability, as would be needed by in-home child
care providers. Tip: You should also notify your insurance company
if you have done recent renovations to your home. Doing this may result
in additional discounts, as well as making sure that your home is
adequately covered. If you've just added a $4,000 wooden deck, increase
the coverage on your home by $4,000 so that the deck will be accounted
for in the event that it is destroyed in a total loss.
You should also
ask if discounts are allowed for a professionally installed and monitored
security/fire alarm system if you have one, as well as a discount
for membership in a formal neighborhood watch program, if one exists
in your area. Ask about discounts for having dead bolt locks, smoke
alarms, and fire extinguishers if you have them or plan to purchase
them. Tip: In an effort to save money, going with a higher deductible
(ex. $500, $1,000) should certainly be considered.
When purchasing your home or even afterwards, consider buying mortgage
protection insurance. This coverage can pay for the remaining balance
of your mortgage in the event of the death of you and/or your spouse.
Tip: Be careful when buying some life and/or mortgage protection insurance
that will pay only in the event of ACCIDENTAL death.
For most of us, our home will be the biggest purchase of our lives,
so don't skip when protecting this most precious asset. Tip: When
something happens that results in you filing a claim through your
insurance company, consider whether filing the claim is worth it financially
(i.e., if the claim amount is considerably more than your deductible),
for you to receive the compensation while putting a claim on your
record. Of course, this is why we buy insurance. However, insurance
companies have underwriting guidelines" in regards to the amount
and/or frequency of claims that are allowed before they cancel a homeowner's
insurance policy. The point here is that you want to use your insurance
when you really need it, and not for every "minor" incident
that may occur on your property. This especially holds true for people
with lower deductibles (usually $250 or less), because these deductibles
are so low, most people will be enticed to file a claim to recoup
the small amount of expense that they may have spent themselves out-of-pocket.
Finally, remember: as with other insurance policies, the higher your
deductible, the lower your premium will be and vice versa. You'll
find that over the long run, you'll save much more money with the
higher deductible. However, be sure to choose
a deductible that you can afford to pay at the time of a loss. For
this reason alone, (despite paying more in the long run), some people
choose lower deductibles.
Tip: It is a good idea to keep a record of your personal property.
This could mean photographing, videotaping, keeping receipts, keeping
your bill of sale(s) and getting an appraisal for your jewelry. This
"inventory keeping" can definitely come in handy if needed
during the claims process. Some insurance companies may even have
a personal property inventory pamphlet, or brochure that they can
give you to record what personal property you may have.
Other points to consider: some insurance companies will not insure
you if you have certain types of pets, others may consider your credit
worthiness, most will definitely consider the condition of the house
(is it well maintained? any damage to the dwelling and exterior, including
sidewalks?). Some companies may require you to already have homeowner's
insurance before applying for it with them.
Regarding pets, more and more companies are not insuring homeowners
who have dogs with a track record of attacking people. Some insurance
companies frown upon barbecuing on a wooden porch or stoop, because
a lot of fires are started this way. Also, having circuit breakers
instead of fuses is preferred. There are also cases of people using
pennies (because
they're made of copper) in place of fuses when a fuse is blown. This
practice has also caused a lot of fires to homes and is not recommended.
For modern homes, you are much better off upgrading to circuit breakers,
if you currently have fuses. With all of the electrical appliances
that most people have today, fuses don't handle the load as efficiently.
Finally, if you
have been declined by insurance companies for homeonwer's insurance,
your state may have a "fair plan" set up for homeowners
like yourself to obtain coverage. Your insurance agent should be able
to give you a quote and obtain this coverage for you.
