Questions to Ask When Buying Homeowners Insurance
Homeowners Insurance is probably the least exciting part of the home buying process. After all, you’re not looking at your beautiful new home, its lovely garden, or the amenities. Rather, you are faced with a dizzying array of statistics and charts which can be difficult to understand. And when understood, you will still face some difficult decisions: how much of a premium can I afford to pay each month, how much of a deductible makes sense for me, should I consider additional addons which are not covered in a standard homeowner’s policy, etc. As with your real estate broker or attorney, it is important to find an agent who you can trust and rely on. (More on this at the end of the article.)
Here are some tips when making those decisions:
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Does my policy cover actual cash value or the replacement cost? Ideally, you would choose coverage that stipulates the replacement cost. If your policy covers only the cash value of your claim, depreciation comes into play. For example, let’s assume that a fire occurred in the kitchen and ruined your appliances. We all know that old appliances are worth far less in its cash value than when it was new. The replacement option ignores this fact and pays the full price for new appliances after the deductible is met. But, of course, deciding to choose the replacement value would raise your monthly premium.
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Is my fine jewelry or art covered in my policy? Most policies place a limit on claims concerning luxury items. Find out if you can upgrade your policy to cover these items.
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Am I covered regardless of how my home was damaged? While water damage from a sewer overflow or due to a neighbor’s negligence, etc. are often covered in a standard policy, flood damage from a storm is not. Sunshine State residents should seriously consider adding flood/hurricane insurance to the policy.
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Am I covered if someone is injured in my home? A standard policy specifies the amount of liability coverage you are entitled to if you are sued. This amount can be adjusted up or down, and will, therefore, raise or lower your monthly premium.
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What’s the best way to lower my monthly premium? As with auto insurance, you should determine the highest deductible you can afford to pay each month in the event of a disaster. The higher the deductible, the lower the premium. Also, you can earn insurance credits for home alarms, non-smoker credits, and sometimes retiree discounts.
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Will it cost more to insure an older home or a newer one? Newer constructed homes usually carry a lower premium due to modernized construction techniques and improved safety features. Modernizing safety features in an older home should also serve to lower premiums.
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How can I make the process easier? A good way to ease the process is to provide your insurance company with a home inventory and valuables.
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What if the local building codes changed, and you must have part of your home rebuilt or repaired due to damage? A typical policy will exclude that. You have the option to add ordinance or law coverage to your policy to cover these expenses. But, once again, this will raise your premium.
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Are there any less expensive ways to save money on my premium? Yes. An excellent idea is to bundle your auto, home, and other insurance coverage with the same insurance company. This can often serve to lower your premium as much as 20-25% if you do your homework.
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Any other ways to save. Once again, the answer is, yes. Comparing the rates offered by different insurers is especially important. Remember, insurance companies are in competition with each other for your business.
As alluded to earlier, if any of the readers of this newsletter needs a referral, I would be more than happy to recommend insurance brokers who are respected in the industry for their integrity, honesty, and experience.