Purchasing Homeowners Insurance
There are four guidelines you should follow when buying homeowners insurance.
- Compare policies - Be sure to shop around a bit before deciding on a policy. It is recommended that you receive at least five insurance quotes before choosing which one best suits your needs. While it might be slightly time consuming to fill out the questionnaires in order to get quotes, it will be worth it in the long run as you can end up saving yourself hundreds or even thousands of dollars.
- Read each policy carefully - Some policies do not cover things that might seem basic and essential. You must read each policy carefully to ensure that you will be covered in all of the appropriate ways. If you have questions, be sure to ask. If you are told something by an insurance agent but it is not written in your policy, you need to get it in writing.
- Lowering your premiums - Ask your agent what you can do to lower premiums on the policy. There are many simple things you can do, from maintaining proper landscaping that would prevent the spread of a nearby fire to fixing potholes on your property, to significantly lower your premiums. Even if you cannot meet the requirements to lower premiums before purchasing the policy, you will be able to adjust it after the initial purchase.
- Keep your eyes peeled - Even after you have purchased an appropriate policy, do not turn your eyes away from the market. It is always good to know if you could be receiving a better deal than you one you originally signed to.
It is essential that you accurately calculate the percentage of your home that you want to cover with homeowners insurance. This figure is irrespective of the market value of your home; instead, it is based on how much it would cost you to completely rebuild your home if it suffered total destruction today. For example, if you could sell your home for $300,000, but to rebuild it would only cost $250,000, then $250,000 is all that you need to insure it for. Keep in mind that you are insuring only your home, not your land.
Appropriate Coverage of Homeowners Insurance
With homeowners insurance, you choose what percentage of your home you want to cover. Obviously, the best would be to cover 100 percent of its current replacement cost; unfortunately, this is also the most expensive. A reasonable alternative is to insure 80 percent of its current replacement cost. If you choose to insure for less than 80 percent of the replacement cost, you will only receive the "actual cash value" of your loss. This means that depreciation is considered and you would have to pay current prices to replace lost items.