HOME INSURANCE 101
Home insurance is an unavoidable expense that comes with owning a home.
Evaluating your insurance carrier annually, regardless of whether or not you want to switch insurance companies, is never a bad idea and can result in a lower rate.
Some research and basic home insurance knowledge can be extremely helpful when comparing policies:
• Higher deductibles lower the premium the insurance company charges you. Just make sure you have enough cash to cover the larger deductible.… Most companies offer discounts for smoke detectors, burglar alarms, dead bolts, fire extinguishers, and Neighborhood Watch programs. Third-party alarm monitoring systems earn higher discounts.… Earn “multiple coverage” discounts by using one carrier for all of your insurance.… Your premiums will be higher if the nearest fire station and fire hydrant are too far away for effective emergency aid.…
• Going without a claim for 3-5 years may warrant a discount. And most companies reward longevity of service with a discount.…Some companies offer discounts to people who have paid off their mortgage.… Discounts often apply if your home was built or rebuilt within the past 10-15 years.… Check out non-smoker, early retirement, and live-in-housekeeper discounts.
• Mortgage lenders require borrowers to carry insurance, but even those who own their homes outright need insurance.
• Policies pay settlements on an actual cash value basis or a replacement cost basis. The “actual cash value” method entitles the owner to the depreciated value of the damaged property. The “replacement cost” coverage model, costing more, pays the amount to actually replace lost or damaged items.
• An "all risk" policy covers losses from any peril not specifically excluded from the policy. A "named perils" policy covers losses only from perils specifically listed in the policy.
• There are four basic types of coverage contained in a homeowner’s policy: 1) Dwelling and Personal Property. This should cover damage to the structure. 2) Personal Liability. If someone trips on your steps and sues, this may cover the legal fees. 3) Medical Payments. This may cover medical treatment for visitors who suffer injury or illness in your home. 4) Additional Living Expenses. If your home becomes uninhabitable, this may cover expenses for time in a hotel.
• You are responsible for loss recovery. To prevent forfeiture of coverage and increase your ability to get a settlement: notify carrier immediately after a loss; make repairs to prevent further damage; list personal items damaged; show an insurance representative the damage; complete a statement explaining circumstances for the insurance company.