Buying Home Insurance

October 25, 2020

Purchasing home insurance provides peace of mind should an unfortunate event such as a fire, a robbery, or an accident happen at your dwelling. Being without home insurance would be a recipe for financial disaster if you needed to rebuild your house, replace lost items, or pay the expenses of someone injured on your property.

Unlike car insurance, home insurance is not mandated by law. However, to protect their institution from possible loss, most mortgage lenders require homeowners to obtain home insurance. Beyond their specifications, a wide variety of options exist for people shopping for home insurance.

To make sound decisions about coverage and cost, keep the following in mind:

Understand what is included

Figuring out what your policy should include takes some thought. You want to make sure of adequate coverage should you need to make a claim, but too much extra drives up the price of your premium.

Experts often suggest focusing on replacement cost – the amount that would cover the labor and materials needed to completely rebuild your home. Don’t worry about figuring out replacement value on your own. An insurance agent can assist in deriving that figure by asking you some questions (such as the year the house was built, what it is made of, total square footage, etc.) and doing some research.

When building a policy or comparing offers from different companies, note what each includes. For instance, which specific weather occurrences are covered? Many areas require purchasing an add-on or separate policy for flood protection.

As for your belongings, the industry rule of thumb is typically that the amount of personal property coverage should be at least half of your dwelling coverage amount. Conducting a home inventory can help you assess all your “stuff,” and this record can later prove valuable if needing to make a claim. (Taking a video is a quick, efficient method.) Large collections or expensive items such as jewelry or furs might make upping your coverage a smart idea.

Your policy also will include sections on liability and medical payments. This information states how much your insurance will pay out should you damage someone else’s property or if someone gets injured at your house.

Ways to save money

Every consumer wants to stretch his dollar. A few ways to lower premiums for home insurance include:

• Taking a higher deductible

  When a claim is made, a deductible is the amount you’re responsible for paying before any insurance coverage clicks in. Choosing a $1,000 deductible over, say, a $500 one will lower your annual premium. However, it also means you’ll take on more of the financial responsibility if an event happens for which you need to file a claim.

• Bundling coverage

  Insurance companies often sell more than just home insurance and provide deals to those making multiple purchases. Buying both home insurance and auto insurance, for example, from the same provider could reduce costs.

• Instituting safety measures

  Actions that reduce the risk of needing to make a claim can lower what an insurance company charges for coverage. For instance, a company may give a discount for those who install a security system, put in deadbolts, or replace an old roof.

• Watching your number of claims

  Remember that insurance companies exist to make a profit. While you definitely want to exercise your right to compensation should a major money-zapping event occur, shouldering the burden yourself for smaller issues could be a better decision. Insurers look at individuals who make a multitude of claims as high risk and subsequently could raise rates on them or decline policy renewal. Also, some policies include discounts for remaining claim-free. Erasing this discount may prove more expensive than assuming the cost of a minor matter yourself.

• Shopping around

  Lastly, do some legwork! Home insurance costs can vary widely by provider. Search for a policy that gives you the coverage you desire – and the most bang for your buck.