General advice suggests purchasing enough insurance to cover the labor and material costs required to reconstruct your home, with your agent helping to identify an adequate sum.
Make sure to have adequate liability coverage should anyone be injured at your home – an umbrella policy may be necessary in this instance. What you need to know is covered below but you also have to know the difference between homeowners insurance vs home warranty.
Know What You Need
Homeowners insurance provides essential protection for your dwelling, personal property and liability needs. When choosing a policy it should cover enough to rebuild or replace both.
Make sure you have enough additional living expense coverage (commonly known as loss of use) should disaster damage render your home uninhabitable, including temporary housing, meals and transportation expenses. This can help cover additional living costs such as temporary accommodations.
Many insurers provide online tools that allow you to easily calculate how much coverage is necessary, while independent agents are available to assess your situation and home to recommend policies tailored specifically for you.
Know Your Limits
Homeowners insurance policies contain limits for coverage of possessions such as furniture, electronics and fine art. If you own valuable items that could exceed these coverage levels, consider increasing these limits or purchasing an additional personal property floater policy to provide adequate protection.
Make sure your homeowners policy covers the replacement cost without subtracting for depreciation and provides sufficient liability protection – either directly from your Declarations page or online tools.
Review Your Policy Regularly
Homeowner insurance premiums depend on a range of factors, such as age and condition of the property, security systems and fire alarms installed, as well as your deductible amount. Over time, your possessions’ values change too – altering actual cash value coverage in your policy; inflation has an impactful increase cost of rebuilding so homeowners should also consider a guaranteed replacement value policy as protection against these challenges.
Review your policy whenever your circumstances or life milestones change or when an “insurance-qualifying event” such as having children, purchasing a new car, getting married and other life events occur. Reviews can also be beneficial annually when policies come up for renewal; doing this can reveal discounts or optional coverage you could qualify for as well.
Don’t Forget About Add-Ons
At such an immense expense and effort is put into buying a house, it’s surprising how little consideration is given to homeowners insurance. A comprehensive policy could save consumers from financial ruin in case disaster strikes; consumers should carefully research all available policies.
Most policies include inflation protection, which automatically adjusts dwelling and personal property coverage limits each year to keep pace with increasing homebuilding costs. Add-on options might include earthquake or back-up sewer coverage.
An umbrella liability policy, which protects against claims that exceed the standard homeowners’ policy limit, could also be worth exploring. Many policies provide coverage for expensive jewelry, fine art and electronics; plus additional loss-of-use coverage up to a specified limit can help cover living expenses in the event of disaster.
Don’t Underestimate Your Home’s Value
Homeowner insurance costs can be an integral component of buying a new home. Your mortgage lender may even require that you secure coverage before they will approve your loan application.
Your agent should assist in selecting an amount of dwelling coverage appropriate to your home and in understanding the difference between actual cash value and replacement cost policies. Replacement cost coverage accounts for costs related to rebuilding it at current labor and material costs without taking depreciation into consideration.
Homeowner’s insurance can always be purchased at competitive rates if your existing policy runs its full term; switching carriers doesn’t need to wait until this point in time if both policies start and end on the same date.