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Special Homeowners Insurance Considerations for Young Families

At this life stage, young families often take the big plunge into home ownership – a step that instantly requires you to get smart about home insurance.

  • If you are purchasing your first home, or reviewing a new homeowners policy, remember that you only need to insure the home itself and your possessions – not the land your house sits on. Thus, you should expect that the insured value of your home will be less than the market value.
  • Growing families often find that their ‘starter home’ needs improvement. Be sure to alert your insurance company when making any major home improvements – usually anything over $5,000 – as you will want to update your homeowners insurance policy to reflect the new enhancement and prevent being underinsured.
  • In maintaining your residence you must realize that you are liable for things that happen on your premises. Keep in mind that in many states you could be held legally responsible for the actions of anyone who drinks in your home and then has an accident in your house or after leaving it. Your policy should protect you against lawsuits due to these types of liability issues.
  • Also as you install backyard items for your active kids – swing set, trampoline or swimming pool – inform your insurance company. These items may require you to increase your liability coverage through an umbrella policy that protects you in the event that someone is injured while on your property.
  • As you acquire more valuables – jewelry, family heirlooms, antiques, art – you might want to consider purchasing an additional “floater” or “rider” to your homeowners policy to cover these special items. They’re typically not covered by a basic homeowners or renter’s policy.
  • Finally, we all know that raising kids can be tough on your budget. One way to keep your yearly premium costs down is to consider increasing your homeowners deductible. Bear in mind that raising your deductible increases the out-of-pocket costs you will have to pay in the event of theft or damage to your home.

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Homeowners Insurance Considerations for All Life Situations

Always shop around and compare the costs of comparable coverage from different insurers to get the best value. Whether you are a homeowner or renter, the appropriate coverage offers important protection.

  • For homeowners, insurance protects your home’s physical structure, as well as your personal property.
  • In contrast, renter's insurance only protects your personal property. Never assume that the landlord’s insurance covers you or your belongings. Landlord’s insurance only protects the building.

Both homeowners and renters may need protection against liability for accidents that injure other people or damage their property.

Let’s be more specific about homeowners insurance and the different types of protection it can provide:

  • Damage to House. Covers damages to the house itself up to the face amount of the policy. For example, if the face amount is $100,000, that’s the most you will receive if your house is totally destroyed, less any deductible.
  • Other Structures. Covers damage to other structures or buildings, such as a detached garage, work shed or fencing.
  • Personal Property. Covers damage to – or loss of – personal property. Personal property includes household contents and other belongings used, owned or worn by you and your family. Be aware that certain personal property items like jewelry, antiques and artwork may need special added coverage.
  • Additional Living Expenses. Covers the necessary living expenses, up to the stated limit, incurred by the insured to continue, as nearly as possible, the normal standard of living when the house cannot be occupied due to a covered loss.
  • Comprehensive Personal Liability. Protects you against claims arising from accidents to others on property that you own or rent. With a few exceptions, such as auto or boating accidents, it is an all-purpose liability coverage that follows you wherever you go.
  • Medical Expenses. Covers medical expenses, but is limited to an amount per person and per accident for injuries occurring on your premises to persons other than an insured. It also may cover medical expenses away from your premises if caused by you, a member of your family or your pets.

You have the option to insure your home and belongings for either replacement cost or actual cash value.

Actual cash value is the amount it would take to repair or replace damage to your home after depreciation.

Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. A good rule of thumb is to insure your home for at least 80 percent of its replacement value, recognizing that in most instances, the value of the land doesn’t need to be included.

Be aware that coverage for damage caused by flooding is NOT included in your homeowners policy. If you live in an area prone to flooding from any cause – for example, hurricanes, rivers or streams – be sure to inquire about purchasing flood insurance, which is available through the federal government’s National Flood Insurance Program (NFIP).

Here’s an important tip: It’s a good idea to make an inventory of all of your personal property, along with a photograph or video of each room. Also, save your receipts for major items and keep them in a safe place away from your house or apartment. That will make it easier if you ever need to file a claim.

Your home insurance premiums are affected by a number of factors, for example:

  • Your home’s specific characteristics are important…
    • Its age; older homes typically cost more to insure.
    • Its type of structure; for example, brick, frame, stone or synthetic siding
    • Its wiring
    • Its roof
    • Whether it has a garage
  • Your home’s location also has an impact on your premiums. For example…
    • Its proximity to a fire station
    • Its exposure to extreme weather – hurricanes, tornados or earthquakes
    • Whether it’s in a neighborhood that’s more prone to theft than others
  • Protective devices can also make a difference. For example…
    • Burglar alarm systems
    • Smoke detectors
    • Fire extinguishers
    • Sprinkler systems
    • Dead bolt locks

Having these items throughout your home definitely helps lower your premiums. And, of course, they also greatly help reduce potential damage and injuries.

  • There are some personal characteristics that affect insurance premiums:
  • Non-smokers might pay less for homeowners insurance than smokers.
  • And remember, it’s important to maintain a good credit history because many insurance companies consider credit history when determining how much to charge you for insurance.
  • Your previous claim history has a big impact on your premiums. Consider not putting in claims for smaller amounts/events to avoid being tagged for a premium increase. You may want to consider a higher deductible if you are unlikely to file a claim for a loss that is less than $500 or even $1000.
  • Consolidating homeowners and auto policies with the same insurer can provide a multi-policy discount.

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