Homeowners insurance basics

One of the first things on a new homeowner's to-do list undoubtedly should be to attain the proper coverage for their home and their personal belongings they will be placing inside of it. Getting covered doesn't have to be a tough task. Here's a little information regarding homeowners insurance policies which you may find rather helpful as you embark on the the journey of home ownership.

 Insuring the Structure of Your Home

These are 3 of the most common ways to insure the structure of your home.

  • Replacement Cost – This type of policy pays the homeowner the cost of replacing the damaged property with the exclusion of a deduction for depreciation and limited to a maximum dollar amount.
  • Extended Replacement Cost – An extended replacement cost policy covers a certain percentage over the limit, which gives homeowners protection against things such as a sudden increase in the cost of construction. The overage percentage is usually somewhere around 20%.
  • Actual Cash Value – This kind of coverage pays the homeowner the cost to replace the home minus any depreciation costs for age and use.

 Tips for Insuring Your Home to Value

  • Calculate the Cost to Rebuild Your Home: An easy way to calculate the estimated amount it would take to rebuild your home is to multiply the local building costs per square foot by the total square footage of your house. This by no means is considered an actual estimate, but it should give you a good idea of what the cost to rebuild might be. Other factors that may impact the cost to rebuild your home include the type of materials used, the style of the home in addition to other unique interior or exterior features.
  • Don't Insure Your Home For the Market Value: It's recommended you never insure your home for its market value because the cost of rebuilding can always either increase or decrease.
  • You Might Want to Insure the Amount of Your Mortgage – Most lenders require homeowners to purchase enough insurance to cover the total amount of their mortgage in order to cover the cost of rebuilding.

 Insuring Your Personal Belongings

  • Replacement Cost Coverage: An insurance policy which pays the specific dollar amount required to replace damaged personal property without deduction for depreciation.
  • Actual Cash Value: A policy which covers the amount needed for replacement minus the depreciation. Most homeowners insurance policies cover actual cash value unless specifically stated that it includes replacement cost coverage.

 Be sure that you check the limits of your policy in regard to your personal items such as jewelry, expensive clothing and electronics. Also, keep in mind that you will want to make an inventory of your personal belongings and update that list each year or whenever you make any large purchases.

 What Does Homeowners Insurance Cover?

Every situation is different, but most homeowners insurance policies typically cover total loss or partial damage due to natural events such as fire windstorms, hail or explosions in addition to theft and the cost of relocating while your home is being rebuilt or repaired. They also likely cover the legal liability of the homeowner in the instance that themselves, members of their family or their pets injure other people or damage their property. It's important for homeowners to perform annual checkups in order to keep up with an inventory of their personal belongings as well as the costs of building or remodeling.

The Costs of Homeowners Insurance

The average annual cost of a homeowners insurance policy can differ depending on multiple factors. For instance, the square footage of your property can play a role in the price of your insurance in addition to the crime rates in the neighborhood and how likely it is to be damaged due to natural disasters. As with any other insurance policy, the number of claims submitted by the homeowners over a certain period of time can also affect the price of the premium.

Tips to Help You Save on Your Homeowners Insurance Policy

  • Maintain Good Credit - Some companies who offer homeowners insurance policies base their rates on the applicant's credit history, so it's important to maintain a healthy credit score in order to get the best deal.
  • Increase Safety and Security - The majority of insurance companies offer up to 15% discounts on homeowners premiums if the home features things such as deadbolt locks, premium smoke detectors, fire extinguishers and surveillance systems. It's recommended you ask your insurance representative what is required in order to qualify for this kind of discount.
  • Increase the Deductible – Similar to any type of insurance policy, increasing your out-of-pocket deductible can save you on your premium from month to month.
  • Ask About Multi-Policy Discounts – You could be saving a substantial amount by combining your vehicle, homeowners and any other type of insurance you need. This is because many insurance companies also offer discounts to those who have multiple policies with them.
  • Fortify Your Home – You may also be able to save a bit on your homeowners insurance premium by reinforcing the structure of your home to protect it in the case of a natural disaster. For example, you could look into installing a tougher roof or sturdier windows.
  • Compare Coverage and Costs – Coverage and costs can vary from company to company depending on a number of factors. This is why you of course want to shop around for the best policy which fully covers your insurance needs before committing to just any company.

 All in all, an applicable insurance policy is a must have for any homeowner. As with any other insurance policy, it's important that you understand what exactly your policy covers and how it works. Also, make sure that you review your policy each year to ensure that your property is properly covered. If you have any questions or concerns regarding your coverage or the cost associated with your homeowners policy, you may want to get in touch with your insurance agent in order to have them clarify the details for you.

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All information provided is deemed reliable but is not guaranteed and should be independently verified.