Three Things To Consider When Buying Homeowners Insurance
If you own a home, you need homeowners insurance. But how do you figure out how much insurance to buy? You don't want to buy more than you need because of the expense, but you don't want to find yourself coming up short after something happens and you need to use it, either. Here are three things you should consider.
1. Don't shop on price alone.
It can be tempting to pick a policy that's got the lowest monthly payment because the odds are good you'll never use it anyhow, right? Wrong. The odds are actually good that you won't file one often, but statistics indicate that you will probably file one sometime within the decade.
Before you decide on which homeowners insurance policy to buy, consider such things as the deductible, the amount of coverage you're getting for the price, and the reputation of the company. That last item, in particular, is important—if a company has a reputation for doubling its rates after just one claim, you want to steer clear.
2. Cover all your bases adequately.
There are four basic areas your insurance should cover:
- the personal structure of your house, should it be damaged or destroyed in a fire or another accident
- any personal property you have inside the house that gets damaged or destroyed
- temporary living expenses, including short-term housing and a rental car
- personal liability coverage, in case you get sued by someone over a slip-and-fall injury, dog bite, or another accident
The last section, in particular, is important to discuss with the insurance agent. Some insurance policies include a no-fault clause that will cover minor medical bills if someone does something like trips over a frayed bit of carpet and twists and ankle. However, it should also provide you with an attorney if you're sued over something more serious. It also covers you if you lose, up to the limits of your policy. Anything that exceeds your policy would be something you'd have to pay for out of pocket.
For example, if you are sued for $250,000 over a dog bite claim, the jury may find you liable for $150,000. If your insurance only covers $100,000, you would be liable for the other $50,000.
3. Consider a personal articles policy.
Your insurance policy may not fully cover your most treasured possessions. Most insurance companies have limitations on individual items. This is particularly important to consider if you are a collector or you are a hobbyist of some sort because there are some common items that might not be fully covered under the remainder of your policy:
- expensive sports equipment, like scuba gear or ski gear
- cameras, including individual lenses, which can run into the thousands each
- individual jewelry items
- fine art, including hand-woven rugs, paintings, or pottery
- computer equipment and other electronics
You should also ask your insurance agent if the policy covers the appraised value, the replacement value, or the estimated actual value (which can be lower because some items depreciate over time).
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