You’ll never really need it unless disaster strikes–and that’s precisely the time many homeowners find out that their policy is missing something crucial. Or you may find out that the amount of coverage you’re paying for something could be far too high. We don’t want that to happen to you, so we’ve compiled this comprehensive guide to home insurance.
When Should I Review My Homeowners Insurance Policy?
Here’s the truth—reading through your homeowners insurance policy can be a dense, long, but vital read. A good rule of thumb: review your homeowners policy every year around renewal time. Your policy renewal date should be located on your printed policy or in your online account dashboard. Review your policy yourself, or alongside a trusted insurance agent.
Insuring Your Home Structure
There are three ways that you can request to insure the structure of your home:
1. Replacement Cost
This type of insurance that will pay you, the policyholder, the cost of replacing damaged property. Note: this does not include deductions for depreciation.
2. Extended Replacement Cost.
This type of policy covers costs up to a certain percentage over a given limit, usually about 20%. This gives policyholders protection against things like unexpected increases in the overall cost of construction.
3. Actual Cash Value
This policy covers the cost to replace your entire home, but does not include depreciation costs for things like age and general wear and tear.
Pro-tip: insure your home for the amount it would cost to rebuild their home, not the market value of the house. Otherwise, you may find your insurance company only pays a portion of what it will take to replace the lost or damaged structure. Many insurance companies only require that policyholders get a policy that covers their mortgage in the event of a disaster!
Insuring Your Personal Belongings
There are two ways to cover insurance for your personal items:
1. Replacement Cost Coverage
This will pay the dollar amount needed to replace damaged items with similar items but without a deduction for depreciation.
2. Actual Cash Value
This is when you, the policyholder, gets an amount that is equal in replacement value of the damaged belongings minus depreciation. Usually, coverage is automatically for actual cash value unless expressly specified elsewhere in your policy.
Instances Typically Covered by Insurance
Homeowners insurance covers a variety of instances that differ from state to state, due, in part, to the weather conditions found in your area. Typical policies usually include coverage for:
- High winds
- Hail
- Riots
- Water damage (minus floods)
- Explosions
- Other unexpected losses (such as theft)
If you live in an area prone to flooding, tornados, earthquakes, or other natural disasters, discuss additional policy options:
- Flooding insurance (Flood plains may change from year to year)
- Hurricane or tropical storm insurance
- Earthquake or tornados
You might also want to consider these addendums:
- Dog bites
- Mold
- Trampolines
- Swimming pools
Certain factors can change the amount of coverage you’ll receive on your insurance: building costs in your area, crime rates in your zip code, and distance to a fire hydrant or the nearest police station. Take the time to research these factors before selecting a home insurance policy.
Take the Right Precautions
Even if you’re happy with your homeowners policy, consider taking these precautions:
Check for any policy limitations. This might include valuables such as jewelry, furs, and even technology equipment like computers. Oftentimes, insurance companies will offer “floater” policies for special items like these.
Take photos and/or videos of your valuables. Keep them, as well as any receipts, in a safe place such as in cloud software, where you can always access them.
Pro-tip: update your valuables list if you make any major purchases.
What if I Want to Switch Home Insurance Companies?
Talk to your friends, family, and neighbors about who they’ve obtained coverage through. Visit online review sites for more information and don’t be afraid to interview other insurance agencies.
At the end of the day, know that it is your policy. If you sense you’re being upsold or being made to take on a policy provision you don’t need, research typical policy addendums in your state and talk to other insurance agencies. It’s perfectly okay to switch policies if you’re unhappy with your current insurance agency, or if you can get a better deal for similar coverage.
Securing a Homeowners Insurance Policy
If you’ve never gotten a home insurance policy before, trust us—you don’t want to be without insurance if there’s a disaster. Here is our advice for selecting the best policy for your needs.
- Start Shopping Early. Processing your request often takes time, paperwork, and a lot of questions. Begin looking for an insurance company as soon as your offer is accepted
Pro-tip: Inquire about bundled policies, such as auto and home insurance. This could save you more money than if your policies are with separate companies.
- Get a C.L.U.E.: The Comprehensive Loss Underwriting Exchange report offers seven years of personal-property claims history of the property you’re looking to buy. If the current owners have filed quite a few claims during their ownership, especially related to water damage, an insurance agency may be less likely to grant you a policy. Only the homeowner can get their own claims report, so you’ll want to request this from the seller.
Pro-tip: Keep an eye out for patterns that suggest risk of future claims, such as several break-ins. These patterns don’t necessarily mean that your application will be rejected, but you may get charged a higher premium.
- Keep Track of Your Credit: Most insurers run your credit history before they’re willing to issue a policy. Poor credit indicates that you’re at a higher risk to file a claim which could lead to a rejection of your request.
Pro-tip: Keep track of your credit with a credit tracking tool or by running credit reports for yourself regularly. Check your report for errors, working to clear up any issues indicated.
Paul Davis Has You Covered
We want you and your home to be safe and sound. In the event of disaster, our expert team is here to help. As insurance professionals, we know how vital proper coverage is, especially in the face of a life-altering event. We’re by your side 24/7 to help you when you need it most.
You can read more of our helpful tips here. If you should need immediate assistance, call us at 651.243.0737.