Homeowners Insurance: The Basics
By USInsurance.com Staff
Buying the right amount of
homeowners insurance is not the easiest thing in the world because homeowners insurance addresses so many needs.
It covers not only the cost of the house itself, but the contents inside; you're also covered for the loss of its use (i.e., staying at a hotel if your home burns down); the loss of other certain personal possessions of the homeowner outside the home (your bike gets stolen at the park); as well as any accidents that may happen inside the home for which you get sued.
Sounds complicated, but here's the bottom line for how much you need: If your home were destroyed tomorrow, would insurance rebuild the house and replace all of the contents inside? Many policies will offer this “replacement” value as the default coverage, but be sure you know for sure.
But if not replacement value, be wary of policies that offer “fair market” or “cash value” policies. These will reimburse your items for their value now, which is based on depreciation and wear and tear, but which might be far less than what it costs you to replace your belongings. In addition to coming up short with the dollar amount, it's a headache for you because you’ll have to document the value of your belongings.
Many things could affect what you pay in premium. For example, installing a sprinkler system or fire alarms will help protect the structure and the contents inside and should lower your premium. If your deductible -- which is the amount you pay in the event of a claim -- is higher, your premium is lower. (But be sure you have the amount of the deductible on hand in case you need to make a claim.)
Also, be aware that you want coverage for the amount it would cost to rebuild your home and replace the items inside. That's not the same as market value; it's simply the amount it would take to rebuild the home, not taking into account the land costs. A local builder or real estate agent could help come up with an estimate. Many policies will cover your household goods at 50 percent of the home’s replacement cost; check through your belongings and determine if it’s not enough coverage.
Also be sure to check out the liability coverage in your policy, which covers you if someone were to have an accident and get hurt on your property.
Things You Might Not Have Coverage For
Some items are typically not covered by homeowners
insurance, such as earthquakes, floods, other “Acts of God,” or war.
You should also investigate coverage for your high-value goods like jewelry. Insurance companies will often place a ceiling on how much they’ll cover, so you’ll need to investigate whether you need a special add-on, or “rider,” to your coverage.
To help you determine all this, create an inventory of your stuff to ease the claims process. The Internet has now made this easier, which sites like knowyourstuff.org and makelifeeasy.com offering software that makes it easy to inventory all your stuff by room, with purchase dates, replacement costs and serial numbers. You should also upload photos to create a visual record.
In addition to this, take a videotape of the inside and outside of your house as further proof of the value of your things.
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