Homeowner's Insurance
 

        Knowing how much insurance you need and being informed can save homeowner's money now and in the future and insure that the coverage will be available in the event of a disaster. Today, adequately covering a home from damage extends far beyond the basic fire, theft and storm coverage.

        The coverage that's available can vary widely from company to company and since homeowner's insurance isn't regulated as strictly as auto insurance, it is best to shop around. Some companies will jack up the price depending on the type of dog you own. Other will offer better credits and good buys can be found if the consumer knows what to look for and which questions to ask.

        An independent insurance agency offers policies through from many different companies and they are supposed to do the shopping for the client. They will also be able to offer advice and point out hidden values. For example, the premium for liability coverage of $500,000 would only cost $10 to $15 a year more than the $300,000 premium. The agents are trained to find values like these and offer them to the customer.
 

        There are two versions of insurance that can be chosen to cover a home- replacement cost or actual cash value. Replacement cost insurance is often recommended by agents and it can make the difference between having the coverage when you need it or having a shortfall between the damage expenses and the insurance proceeds.

        Actual cash value insurance will factor in depreciation when determining the amount of the claim. Replacement cost pays for all expenses less the deductible. For example, a roof has a life expectancy of 20 years. If a homeowner has problems in 10 years, the cash value insurance would factor in 10 years of depreciation less the deductible. The homeowner would be responsible for funding the other half of the expenses. An automatic inflation guard is also recommended with replacement cost insurance to protect the homeowner from the cost of inflation between the time the policy was purchased and the loss was sustained.

        Common practice for replacement cost insurance is to provide a percentage above the cost of the dwelling listed on your policy (coverage A). The general rule is 25% - 30% above the dwelling amount.
 

        There are exceptions to the replacement cost insurance policies. Homes that are more than 50 years old do not qualify for replacement cost coverage, but there is a special form available for older and unique properties. The Ordinance of Law coverage provides protections that would allow the homes to be rebuilt according to the current building codes.
          Consumers also need to understand how personal property is valued and protected. Often a policy will be written to cover the personal items at a value of 50% of the home's value. Therefore, if the home is valued at $100,000, the personal effects would be covered up to $50,000. Special endorsements would then be used for jewelry, furs, artwork, and special collectibles.

        Another option is to get personal property replacement, which would cover the contents in the house at their current value without factoring in depreciation. Again, use the special endorsements for the unique and more valuable items.
 

        There are many credits that are available to homeowners that can offset the bigger expenses of insurance coverage. Some of the more popular credits include:         Raising the standard deductible can also create additional savings of 10 to 20%. The most common levels are $500 and $1,000 and we always recommend $500 as the minimum. Insurance agents keep track of claims filed and they can cancel your policy if they deem you a "repeat offender". Finding replacement coverage is then difficult as you have a red flag when you apply with other companies. Therefore, you would only file claims for significant damages and the $1,000 deductible is a worthwhile risk. Your premium savings can help offset the higher deductible when and if you need to file a claim.
          When purchasing a home, the mortgage company will require the property to be fully insured before the mortgage can be finalized. Most will look for 100% replacement cost on the DWELLING only- the land under the house does not need to be insured since it is not at risk from theft, fire, wind, etc.  The bank will also require that a full year of premiums be paid in advance, but that can be escrowed. Properties on a flood plane will need to obtain flood insurance (a separate policy provided through the federal government) before a mortgage can be secured.
   
 
HOMEOWNERS INSURANCE TIPS
Shop around and be sure to consult independent agents.
Raise deductibles to at least $500.
Buy the auto and homeowner's policies from the same insurer.
Consider the home's age, construction, location (flood zone; fire hydrants, etc.) before buying.
Insure the house and not the land.
Consider installing a security system.
Stop smoking.
Ask for senior discounts if they apply.
See if an alumni group or business association offers coverage.
Compare the policy limits with the value of your possessions yearly.
Look for private insurance first if you're in a high-risk area. Sometimes a private insurer can offer a better deal than a government plan.
 
   
 
MORE INFORMATION
National Insurance Consumer helpline
1-800-942-4242
Better Business Bureau
www.bosbbb.com
Insurance Information Institute
www.iii.org
 

 
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