When it comes to building a home, the first step is a firm foundation. In the same way, responsible homeownership begins with a foundation of coverage, made possible by a homeowners’ insurance policy. You want to ensure that you have enough homeowners' coverage to keep your family from becoming financially vulnerable should something happen to your home. Doing so is protecting your biggest asset, that of your beloved home. Read on to learn more about homeowners’ insurance and why you need to invest in it as part of responsible homeownership:
What Should a Homeowners’ Insurance Policy Cover?
Any sort of destruction or damage to a residence either interior or exterior, personal liability if harm comes to others on your property or loss or theft of possessions are all covered under most homeowners’ policies.
Policy Rates: Policy rates are determined by evaluating the risk as a homeowner. This risk is based on past claims, the history associated with your home, the neighborhood your home is in and your home’s condition.
Basic Levels of Coverage
There are three basic coverage levels you should consider when purchasing homeowners’ insurance. They are as follows:
- Real Cash Value: This covers the value of your belongings plus the cost of your home minus your deductible. This means what items currently cost, not the original purchase price.
- Replacement Cost: This covers the real cash value of your possessions and home without paying the deductible, so you can rebuild or repair your home, restoring its previous value.
- Guaranteed (or Extended) Replacement Cost/Value: This is the most complete of all the coverage types. It pays the amount it costs to rebuild or fix your home. This is true even if that cost is greater than your preset policy limit. There is a caveat though, in that you can typically go no greater than 20 to 25% than that preset limit.
What Isn’t Covered, When is an Extra Policy Needed?
The most common situations that are not covered under a typical homeowners’ policy are damages related to earthquakes and/or floods. If you don’t live in an earthquake zone or floodplain, there is little need to worry about investing in those specific policies. However, if you do reside in an area where these events are more likely, it's vital you consider adding additional policies to your coverage, so you are protected no matter what.
Tips For Making Your Homeowners’ Policy More Affordable
The following are some tried-and-true ways to make your policy more affordable:
- Security System: Smoke and burglar alarms help keep your home safer and provide proof in the case of a claim. They can also help to reduce the cost of your homeowners’ policy.
- Consider Materials: If you are planning on a remodel or renovation, consider the materials you use. For example, it’s a good idea to avoid wood structures because they are more flammable than other types of material.
- Consider Multi-Policy Discounts: If your insurer allows, opt for multiple policies within the same company. For example, you can have homeowners, car and life insurance policies all with the same company and merit significant savings thanks to your multi-policy line.
- Increase Your Deductible: If you opt to raise your deductible, your annual premium will go down. Keep in mind though, you will have to absorb this cost if you do need to file a claim.
- Pay off Mortgage: A little-known secret of the industry is that a paid-off-house is cheaper to insure! So, if you have the means, pay off your mortgage because it will then be more affordable to purchase a homeowners’ policy.
- Consider Brand Loyalty: Loyalty when it comes to an insurance company will actually benefit you. The longer you remain with an insurance company, the better they know you and the better the rates you can obtain.
- Compare Regularly: Of course, you know to compare rates before purchasing your policy. However, it’s just as important to keep checking out rates and review your policy options over time to ensure you are getting the best coverage for the best price possible.
Bottom Line: Secure Your Foundation with Insurance
Your home is likely your single biggest asset. As such, it deserves the best coverage and protection, from the foundation up with the right homeowners’ policy. Contact us today to learn more.
