You’ve heard them all:
- “Your home is your biggest investment.”
- “Owning your own home is the only way to truly become wealthy.”
- “Home is where the heart is.”
If what so many people tell us is true about our home, properly insuring
it should be a top priority: A home can be a huge financial downfall
if not insured properly. Yet, most homeowners know very little
about home insurance beyond the fact that their bank requires it.
If becoming a homeowner is the American dream, then protecting your
home is part of that dream. Following is a description of some of the
common elements of home insurance and what to look for when you buy.
How Are Rates Calculated?
Your homeowner insurance premium is derived from a number of factors. Some
of these factors include:
- Where you live – Some areas are more prone to
certain types of claims. For example, some parts of a town may have
historically higher crime rates, such as developments with newer homes.
Also, homes closer to the coast are more prone to flood and wind damage.
- Age, size and construction type – New homes
may be built with stronger materials to comply with newer building
codes. Also, larger homes cost more to replace and are generally more
costly to insure.
- Replacement value of your home – Many home insurance
policies, particularly for newer homes, are designed to pay the cost
to replace your home if damaged. Remember, this is not necessarily
what you paid for your home and it does not include the value of the
land on which your home is built.
- Value of your personal property – In addition
to insuring the physical structure of your home, home insurance pays
for damage to property inside the home, including electronics, furniture,
clothing and other valuables. Make sure to inventory your
belongings – in the event of a catastrophe you’ll need
to be able to recall what was lost. Videotaping your home once
a year can play a crucial role for you and the insurance adjustor.
- Personal liability – Your property is not all
that is covered by home insurance. Most policies also cover you and
your family, including most pets - for bodily injury to other individuals
or property damage which you cause and are legally responsible for,
including lawsuits that may arise from these claims.
What To Look For
While there are many companies looking for your business, selecting one
you trust may be the most important factor - even if it means paying
a little more. Apply these home insurance tips to find the best insurance company
for your situation:
Find a company that fits your comfort zone
Ask: Is
the company as accessible as you prefer? Does it communicate the way
you prefer (e.g. phone, e-mail, etc.)? Does the company have a local
office and do its agents/representatives live in your community? If these
factors are important to you make sure you ask these questions before
buying the policy.
Financial stability
Recent storm damage in the Gulf
Coast region is a great example of the high amount of money insurance
companies may have to pay for claims. Check the financial rating of the
insurance company you are considering by using a rating service such
as AmBest.com or calling your
state’s insurance department. Insuring your home with a company
that is not financially stable may be a bad investment, even if it is
cheaper.
- Claims Service. If you have an incident, the
company’s responsiveness to your needs will be vital. Ask
if the company adjusts claims or if they contract with other companies
who will perform this action on their behalf.
Ask about other products the company sells
One of
the best ways to save money and manage your essential coverages is to
keep all of your insurance needs with a single company. Ask the company
if they sell auto insurance, life insurance or other types of insurance
you need. You may be able to get the coverage through the same company
and thereby save money in the process.
How Can I Get Better Home Insurance Rates?
While shopping for home insurance should never be as tedious as shopping
for a home, you will want to set aside adequate time to consider several
options. After all you’ve invested a fortune in this place; you
might as well save a few bucks on the insurance.
Shop around
Get as many quotes as possible. Compare
the quotes “apples to apples,” meaning that all companies
and coverage options are on a level playing field. Start by asking friends
and family to recommend an agent or company. You may also want to consult
with your auto insurance company and see if they offer a multiple-policy
discount for insuring both your home and your car.
Use adequate values
Many homeowners mistakenly over
insure their homes for property that is not covered, such as the land
on which the home is built. But the reverse is also true. Keep in mind
factors that will increase the replacement value of your home, such as
additions or remodeling work. Such actions affect the value of your home,
and if they are not considered, could lead to a costly penalty for being
underinsured.
Ask about discounts for upgrades
Installing storm
shutters, an alarm system or a new roof are all steps you can take to
protect your home from a loss. Taking proactive steps to prevent a loss
bodes well with insurance companies and they may offer a discount.
Congratulations on buying your home and living the American dream. Insuring
it properly will keep your dream from becoming a nightmare.
To see if you can lower your homeowner insurance premium, get
your free quotes today.
