No one ever expects to be robbed or have a house fire destroy their property, but these tragic events happen every day. Are you prepared for the worst?
Most homeowners don’t think much about insurance until they find themselves ready to buy a new place to live, and at that point, they’re often rushing to close the deal and pack up the moving trucks. But with the price for unexpected damages increasing each year, it’s more important than ever to make sure your insurance coverage is up to the task of protecting all your assets.
With so many options in the market, how do you choose an insurance plan that’s right for you? Before you sign on the dotted line, here are some tips to guide you in choosing appropriate insurance coverage for your home.
Homeowners Insurance Basics
Homeowners insurance is designed to pay you for any damages or loss that might happen to (or at) your residential property. A standard homeowners insurance policy consists of four parts:
This covers any damage to the building you live in. Coverage often also extends to outbuildings, such as a shed or detached garage.
This covers all of your belongings inside the home, including furniture, appliances, clothing, etc.
This covers medical and/or legal expenses stemming from an accident on your property.
This covers the cost of a hotel stay or long-term rental if your home is damaged to the point that you cannot live in it while it’s being repaired.
To make sure you’re getting the right amount of insurance coverage, it’s best to talk to an agent about each portion of your policy. The most basic level of coverage will pay out based on what your property is currently worth. However, due to depreciation, that amount might not cover the cost of replacing items with new versions in the event of fire or theft. For an additional fee, you may choose to add coverage for the replacement value of your structure and belongings for the additional peace of mind of knowing you won’t have to worry about bargain hunting if you have to rebuild your house.
Additional Coverage
Some items are not covered by your homeowners insurance policy. Most notably, flood damage requires a separate policy. While flood insurance is mandatory in a designated flood plain, you may wish to purchase this additional insurance to cover you in the event of unusual flash flooding or other unpredictable water events.
Certain belongings aren’t always covered by general personal property protection, either. For example, if you have expensive jewelry or artwork, you may need to purchase an additional insurance rider to cover more valuable possessions for their full worth. An insurance agent can help you decide which items require additional insurance and point you to a professional appraiser to get a sense of the coverage you need.
High-Rise and Condo Insurance
If you live in a community in which you own your unit, but not the building or any common property areas, your approach to homeowners insurance is a little different. The owner of the building or the homeowners association (HOA) will maintain their own high-rise insurance policy that covers damage to the building, shared infrastructure, such as water pipes and HVAC systems, and the surrounding common property (the gym, pool, gardens, etc.).
Your responsibility is to ensure the remainder is covered. This is typically your personal property and liability within your unit. Each HOA has different parameters that define the responsibility of the HOA and the responsibility of individual residents, so it’s crucial to work with an expert insurance agent to make sure there aren’t any gaps in your coverage.
For example, if your pipes freeze and burst causing water damage to your downstairs neighbor’s ceiling, whose insurance will cover it? You don’t want to be caught by surprise to learn that you aren’t covered for all the complex contingencies of living in a high-rise or condominium community.
Homeowners Insurance Tips and Tricks
Once you have an understanding of the coverage you’re looking for in your homeowner’s insurance policy, it’s time to shop around. These tips will help you get great coverage for the best available price:
Compare Apples to Apples
To make valid price comparisons, make sure you get a quote for the exact coverage you need. Many insurance companies have a “default” quote they’ll provide quickly, but this may not include all the coverage you’re looking for or require. Get a quote specifically tailored to your home so you know the exact cost and can make accurate comparisons among companies to get the best price.
Consider Your Deductible
The deductible is the amount of money you’ll pay out of pocket for damages before your insurance coverage picks up the rest. In general, if you raise your deductible, your overall insurance premiums will go down, which could save you money in the long run. If you’re considering a higher deductible to make your insurance costs more affordable, be sure that you have the amount needed to cover your deductible available in cash savings so you don’t end up with financial pain on top of a major disaster.
Research the Reviews
Price isn’t the only consideration when choosing an insurance policy for your home. You’ll also want to check out the reviews of each potential insurer’s customer service and their track record for paying out claims. If you find unhappy customers and a bad rating from the Better Business Bureau, for example, that lower rate might not be worth the potential hassle when you need to make a claim. Remember that if you suffer a major loss to your property, you’ll already be under great strain — don’t add haggling with a less-than-reputable insurance company to your plate.
Minimize Your Risks
Many insurance companies offer discounts to encourage you to minimize any risky behaviors. For example, you might be able to lower your premiums by installing a burglar alarm or hardwired smoke detectors. When it comes to reducing the chance that something terrible will happen to your home, you and your insurance company are on the same team. Ask what you can do to make your property safer, and you might line your wallet a bit to boot.
Review Your Policy Annually
Homeowners insurance is not a set-it-and-forget-it proposition. When it’s time to renew your policy each year, take the time to review your coverage and make any changes necessary. If you’ve added new personal belongings, remodeled your space or added an outbuilding, check with your agent to make sure your coverage is up-to-date. Doing so will keep you from experiencing any unpleasant surprises in the future.
Homeowners insurance isn’t the most exciting topic you’ll ever discuss, but it is one of the most important. After all, your home is your biggest investment, so it’s important to make sure that it’s fully protected from anything that life can throw at it.
