How Homeowners Should Compare and Buy Home Insurance Policies
If you’re like most people, your home serves as the largest asset you own. In turn, a reliable homeowners policy will protect the value of that important asset. It only makes sense to take some time to learn about homeowners insurance policies in order to choose the best policy and insurer for your needs.
How to Compare Home Insurance Policies
Before comparing home policies, it’s important to understand the basics. The exact terms of homeowners insurance policies can vary considerably. At the same time, expect to find these standard kinds of coverage bundled within the policy:
Damage to Structures
Property insurance protects buildings against covered threats. Generally, covered threats include incidents like fires, storms, vandalism, and thefts.
Homeowners also need to know what typical homeowners policies won’t cover. For instance:
- In a few areas, homeowners must buy separate windstorm policies.
- Homeowners who have concerns about floods from such events as snowmelt, flooded bodies of water, or tropical storms will almost always need to buy a separate flood insurance policy.
- Most home policies exclude earthquakes, landslides, sinkholes, and other kinds of land movement.
- Check to ensure the policy includes coverage for other structures, like freestanding sheds or garages.
- Homeowners insurance won’t cover damage caused by neglect.
Typical policies will cover personal property up to a maximum of 50 to 70 percent of the insured amount of the building. For instance, a home valued at $300,000 for insurance may include up to $210,000 for items such as appliances, electronics, and clothes. Many policies also offer off-premises coverage for possessions damaged or stolen while away from home.
At the same time, most policies will limit benefits for some kinds of possessions. Common examples include fine art and jewelry. Homeowners may need to cover these with a separate policy or by adding a rider to their base policy.
If a visitor to your home gets injured or suffers property damage, they might file a claim against your homeowners insurance. Personal liability may also extend to some events that could happen away from home, such as your child accidentally breaking a neighbor’s window or your dog nipping at the neighbor.
Benefits for personal liability usually max out at about $100,000. Some families with a high net worth might choose to add a higher limit or purchase an umbrella policy.
Additional Living Expenses
Sometimes, you may need to vacate your home temporarily because of extensive damage. If the damage came from a covered incident, your homeowners insurance policy may reimburse you for hotel bills, restaurant meals, and incidentals.
Anybody who needs to move out for repairs will feel relieved to have this coverage; however, the policies generally impose time and expense limits. You probably have the option to upgrade if the policy doesn’t provide enough assistance.
How Much Home Insurance Should You Buy?
First, note that you can choose between different types of insurance benefits:
- Cash value: Just like it sounds, this kind of policy will reimburse homeowners for the actual cash value, including depreciation, and not the current replacement cost.
- Replacement cost: This reimburses at the true cash value of items without deducting anything for depreciation.
- Guaranteed replacement cost: Sometimes called extended replacement cost, this kind of policy will even allow for inflation increasing prices since the home was purchased or policy was first issued.
Obviously, homeowners will expect their homeowners policy to reimburse them for costs and not just limit benefits to the value of used or pre-owned property. Thus, a replacement-cost or guaranteed replacement cost policy offers better protection.
Beyond the kind of policy, mortgage companies usually require homeowners policy limits to reflect the mortgage balance. At the same time, the amount of money owed for the home could be substantially more or less than rebuilding costs. Homeowners should really consider local rebuilding costs for their size and style of home to set policy limits.
Where to Get Help Buying Homeowners Insurance
Our experienced homeowners insurance agents can help you calculate the right amount of coverage, suggest extra protection that’s not included in most base policies, and best of all, shop around to find the right balance of price and protection. Get the help you need by scheduling a free consultation today.