Home Insurance 101
If you are asking yourself, ‘Do I need it?’ the answer is ‘yes’. Although it is not required by law, mortgage lenders do require it. Not only that, but home insurance protects the huge investment you are making.
What does it cover?
Property damage – This coverage helps to pay for property damage and damage to personal belongings. It is essential to properly evaluate the value of your personal property, as some forms will have to be endorsed if they are considered a ‘higher value’ (for example, silverware, fine art, antiques).
Our tip: Take pictures of all of your valuables and write on the back how much it is worth to replace and keep a running inventory somewhere safe like a safety deposit box.
Replacement costs refer to the amount it would take to rebuild or replace the personal property. This amount is calculated based on materials of a similar quality as well as accounting for inflation. There is no deduction for depreciation. We advise our clients to insure their homes for at least 80 – 100% of the total replacement cost to avoid any penalties for partial losses.
Cash settlements are given when the property is not repaired or replaced. This is based on actual cash value after depreciation.
Additional living expenses – If you cannot live in your home while it is building repaired, most companies offer limited coverage for hotel, storage and restaurant expenses.
Personal liability – This coverage protects you in the event that you, or anyone living in your home, are held responsible for property damage or bodily harm due to negligence.
Medical payments – This coverage pays for any medical expenses incurred by someone on your property, regardless of who was at fault. It does not cover your injuries or anyone else living in the household. Keep in mind some breeds of pets are excluded from the coverage as well.
How do you get it?
Shop around for the best fit. Get quotes from at least 3 different companies. Have car insurance? Find out if you get a discounted rate to add homeowner’s insurance.
How can you save?
Think about a higher deductible, this would mean lower rates, but you have to pay more every time you make a claim.
Insurances prices are also affected by the type of construction of the house – brick homes typically cost less than wood frame homes. Also, if you have a brand new home you may qualify for a discount, versus older homes where it is difficult to get full coverage.
For those of you living on an acreage, the distance between your home and the nearest fire hydrant or local fire department affects your fire protection coverage.
Check into any other discounts that are available for things such as installing an alarm systems, no prior insurance claims, being a non-smoker, being mortgage-free and also being older than 45 years.
Post by Yvonne Wilchewski