Insuring your home is like making an investment in your future. You work hard to have a home and homeowners insurance protects you and your family from someone or something from taking it all away. Here are five things to know about Homeowner's Insurance.
- Know About Exclusions to Coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These types of coverage must be bought separately.
- Know About Dollar Limitations or Claims. Even if you are covered for a risk, there may be a limit on how much an insurer will pay.
- Know Replacement Costs. If your home is destroyed you'll receive money to replace only to the maximum of your coverage, so be sure your insurance is sufficient to match your home's value.
- Know the Actual Cash Value. If you choose not to replace your home when it's destroyed, you'll receive replacement cost, less depreciation. This is called actual cash value.
- Know the Liability. Generally your homeowner's insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amounts of coverage provided. Be sure that it's sufficient if you have sufficient assets.
Tips for Lowering Homeowners' Costs
- Review the Comprehensive Loss Underwriting Exchange (CLUE) on the property you're interested in buying. CLUE reports detail the property's claims history for the most recent five years, which insurers may use to deny coverage. Make the sale contingent on an inspection to ensure that items listed in the CLUE report have been repaired.
- Seek insurance coverage as soon as your offer is approved. You must obtain insurance to buy; and you don't want to be told at closing that the insurer has denied your coverage.
- Maintain good credit. Insurers often use credit-based insurance scores to determine rate premiums.
- Buy your home owners and auto policies from the same company and you'll usually qualify for savings. But make sure the discount really yields the lower price.
- Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower. Avoid making claims under $1,000.
- Ask about other discounts. For example, retirees who tend to be home more than full-time workers may qualify for a discount on their theft insurance. You may also be able to obtain discounts for having smoke detectors, a burglar alarm, or dead-bolts locks.
- Seek group discounts. If you belong to any groups, such as associations or alumni organizations, they may have deals on insurance coverage.
- Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.
- Investigate a government-backed insurance plan. In some high-risk areas, federal or state government may back plans to lower rates. Ask your agent.
- Be sure you insure your house for the correct amount. Remember, you are covering replacement cost, not market value or land.
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