10 Things You Should Know About Purchasing Home Insurance
- You Need Home Insurance
Homeowners need to purchase home insurance to protect their
homes and personal property. Those who rent need insurance to protect
their furniture and other personal property. Everyone needs protection
against liability for accidents that injure other people or damage their
- Decide How Much Coverage You Need
The better your coverage, the less you will have to pay out
of your own pocket if disaster strikes. In some cases, your lender decides
how much coverage you need and may require you to buy a policy that covers
at least the amount of the mortgage. It is important to note that the
amount of coverage you buy for your house, contents and personal property
will affect the price you pay.
- Compare Deductibles
The deductible is the amount you have to pay out of pocket on
each claim and applies only to coverage on your house and personal property.
Make sure when choosing a policy that you are comfortable paying the
deductible if you make a claim. Remember, a policy with a $100 deductible
will cost more than one with a $250 deductible. Higher deductibles may
be available at a reduced price.
- Replacement Cost or Actual Cash Value?
You have the option to choose to insure your home and belongings
for either replacement cost or actual cash value. 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.
It is important to insure your home for at least 80 percent of its replacement
value. Actual cash value is the amount it would take to repair or replace
damage to your home after depreciation.
- Shop Around Before You Buy
You are not required to purchase insurance from the company
your lender recommends. There are a number of unbiased sources available
to find out what different insurers charge for identical products and
services, including your state insurance department, consumer publications
and your public library.
- Ask Your Agent About Discounts
In some states, insurers offer lower prices for such things
as insuring your home and car with the same company, installing deadbolt
locks or alarm systems or replacing the roof.
- Basic Coverages Available
Whether you own or rent, there are different packages of home
insurance offered to protect your home and belongings. Each package protects
against a specified number of events that cause damage to property. Three
examples are fire, windstorm and theft. In addition, each package policy
usually contains four additional types of coverage: property damage,
additional living expenses, personal liability and medical payments.
- Where to Shop
Check the newspaper and yellow pages of the telephone directory
for companies and agents in your area. In addition, ask your neighbors,
relatives and friends for recommendations on insurance companies and
agents. Remember to shop around to get the best price and service.
- Read Your Policy Carefully
You should be aware that a home insurance policy is a legal contract.
It is written so that your rights and responsibilities as well as
those of the insurance company are clearly stated. When you purchase
home insurance, you will receive a policy. You should read that policy
and make certain you understand its contents. Keep your policy in
a safe place and know the name of your insurer.
- Review Your Home Insurance Needs Every Year
Check with your insurance agent at least once a year to make
sure your policy provides adequate coverage. The addition of a room,
new insulation or remodeling add value to your home and therefore may
increase replacement cost.
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