Why Buy Home Insurance?
Homeowners need to purchase insurance to protect their homes and personal property. Tenants need insurance to protect their furniture and other personal property. Everyone needs protection against liability for accidents that injure other people or damage their property.
What Affects Home Insurance Prices?
An insurance company sets its own rates based on claims, operating expenses, investment income, and profit. Inflation costs and competition are considered in determining charges for a particular coverage. Other major factors include:
- Number of miles from a fire department
- Location inside or outside of city limits
- Number of feet from a fire hydrant
- Construction of your home (brick or wood frame)
What’s a Peril?
A peril is a something that causes a loss to your home such as fire, windstorm or theft.
How Much Coverage Do I Need?
The more favorable your coverage, the less you will have to pay out of your own pocket if your home is damaged. Sometimes your mortgage lender determines how much coverage you need to carry on your home to protect their investment. Of course the more coverage you buy for your home, possessions and personal property will affect your cost.
How Much Coverage Do You Need?
Home Structure Coverage
Basic coverage is typically enough to obtain financing. However you should determine how much coverage you need based on your home’s structure by calculating current replacement costs. Be careful not to base the amount of coverage based on the market value of their home, since it may not be enough. Especially now, when home prices are falling so quickly, it may cost tens of thousands more to rebuild your home than your home is worth on the market. Contact a building association or a local general contractor to determine the cost per square foot to rebuild a home similar to your own. It is a good idea to review your policy annually and update it any time you make any changes to your home, or you could end up underinsured in a short time.
Possession Coverage
In order to determine how much coverage you need for the contents of your home you will need to take the time and do a complete inventory of your possessions. By estimating how much it would cost to replace your property at current prices you will be able to determine if you will need to purchase additional property insurance. Most homeowners policies cover 50 to 75% of the value of your home for your contents. Again make sure your policy provides replacement protection, not “actual cash value.” Cash value coverage is depreciated and hardly ever provides enough to replace what’s been lost.
Liability Coverage
Liability coverage covers you if someone is injured in your home or on your property and sues. Basic liability protection in homeowners insurance is normally between $100,000 and $300,000, however that may not be enough. You should consider coverage to equal your net worth (assets minus debts) if not more. You can do this with an umbrella policy which provides extra protection to your home and auto insurance. The cost to add on a $1 million umbrella policy is somewhere around two to three hundred dollars a year.
What Is Not Covered In a Basic Homeowners Policy?
It’s important to know what is not covered in a standard policy so that you can buy extra coverage if needed. Some natural disasters, like earthquakes, floods and mudslides, are not covered. You can buy earthquake and flood policies to add onto your homeowners insurance if you live in a risk area. You may obtain coverage through the federal government’s National Flood Program (“NFP”). To learn more about the NFP, contact the NFP at (800) 638-6620. Additionally, you’ll need to take out a rider to cover pricey items like jewelry, art, antiques, etc. The value of these items can push you over the standard maximum coverage in your policy.
What Does Property Damage Cover?
Property damage coverage helps repair your home and personal property when damaged by such perils as fire, lightning, windstorm or hail. The perils of flood and earthquake are only covered when the coverage is added to your policy.
What Does Personal Property Insurance Coverage Include?
In general, the contents of your home and other personal belongings owned by you or family members who live with you are covered under the policy equal to usually 50 percent of the value carried on your dwelling. However, high-valued personal property such as jewelry, computers and cameras should be listed on the policy so that you are adequately protected.
What Does Additional Living Expense or Loss of Use Cover?
The majority of homeowner policies will cover extra costs you experience if your home is damaged by fire, lightning, windstorm or other perils; such as being forced to leave due to the living conditions when repairs need to be made before moving back in or if you are denied access to your home by government order. This coverage has time limits, however it will cover expenses related to maintaining a normal standard of living. This may include the costs of a hotels, eating out at restaurants and using storage facilities.
What is Personal Liability Insurance Coverage?
This coverage protects you and all family members who live with you against a claim or lawsuit resulting from bodily injury or property damage to others and for which you become legally obligated to pay. Defense costs are included, however once the insurance companies limits have been met, the insurance company has no obligation to continue.
What Does Medical Payments Insurance Cover?
This coverage pays for reasonable expenses, regardless of fault for people accidentally injured on your property and the property adjoining your property such as alleys and sidewalks. However medical coverage does not include injuries to yourself or other family members living with you or injuries due to events involving a business that you operate out of your home, your intentional acts, or rental use of your premises.
What is Replacement Cost?
Replacement cost is determined by the amount of money it cost to replace or rebuild your home or repair damages with comparable materials and quality without deducting for depreciation.
What Should I Do If My Premium Increases and I Want to Get Quotes from Other Companies?
Comparison shopping is a great way to save money. When insurance companies compete for your business; you win. Results have shown that consumers can save 20 % and more just by taking five minutes to compare rates from top rated insurance companies. Compare Homeowner Insurance Now has done all the research and due diligence to make sure that you can get all the facts you need here at our site.
How Often Should You Review Your Home Insurance Policy?
Review your policy annually and update everything that was done is the past year. Items like jewelry, paintings that may need to be insured or even taken off your policy. The addition of a room, garage or basement add value to your home and, therefore, may increase replacement cost.
How Can I Get a Lower Premium?
Increase your deductible. (if you were at $250)
- $500 save up to 10 to 15% .
- $1,000 save up to 20 to 25%.
- $2,500 save up to 25 to 30%.
- $5,000 save up to 35 to 40%
Of course if you raise your deductible make sure you can afford this out of pocket cost, if there is a claim. See 13 ways to save on homeowners insurance.
What is Credit Scoring?
A credit score is a snapshot of your credit at one point in time. The credit information from your credit report is put through a mathematical formula (credit scoring model) that assigns weights to the various factors and summarizes your credit information into a three-digit number ranging from zero to 999. Many insurers believe that the lower the number, the more likely the consumer will file a claim.
What Affects Does a Credit Score Have of My Homeowners Insurance?
Check your credit rating. If your insurance company relies on credit scoring, they may use it in two ways:
- Underwriting — Deciding whether to issue you a new policy or to renew your existing policy.
- Rating — Deciding what price to charge you for your insurance by placing you into a specific rating “tier” or level.
- Improve your credit history — If you’ve had past credit problems. If your credit score is causing you to pay higher premiums, ask your insurer if they will re-evaluate you when your credit improves.
Take Charge of Your Credit History
By taking charge of your credit history you will not only save money through your homeowner and auto insurance, you will save in all your financial decisions for the future. Everyone is evaluating your credit so now is the time to improve those credit scores and save money.
- Review your credit report. Get a copy of your credit history from each of the three major bureaus Equifax, Experian and Transunion. and review for errors, outdated information and accounts that aren’t yours. The bureaus will provide information about how to dispute these items.
- Contact your creditors. If you think information is incorrect contact those creditors directly to argue your case. If you are successful in getting the creditor to remove the mistake from your credit report, make sure you get confirmation in writing from the creditor acknowledging the error.
- Keep good records. Keep your paperwork from these disputes and inquiries. You can you these records as proof of reconciling your credit and present it to your loan officer in case of a disagreement.
