Homeowners are naturally concerned about protecting their properties — but many also worry about the protection itself. Making sure you get things right with homeowner's insurance takes information, thought and perhaps a little expert help.
Insurance agents are likely to insist that it's a mistake to shop only for the lowest premium. If you listen to what they say, you'll likely be persuaded that your decision should indeed take other things into account.
When people are looking at purchasing, they should take a step back and consider what they're insuring — the home, furnishings, protection for personal liability. For most people, that global view is probably better than thinking only about premiums.
A basic difference in coverages
Buyers must be aware that some policies provide the replacement value of a home, and some only cover a similar place minus depreciation. The difference is important.
That replacement value is the first thing that comes into play. It's not what you paid for the house, not what you’d sell the house for. It's the amount to rebuild if nothing is left, how much to replace it all. It would include a number for the whole house and a number for the property inside.
You should also know that the replacement value may be different with different agents. If you're comparing apples to apples, the higher value will probably mean higher premiums.
Homeowners who choose to insure for less than replacement value could confront a situation in which they would have to accept something less than what they had before when they repair or rebuild after a major loss.
What's covered, what's not
A homeowner should never assume what is or isn't covered by a policy under consideration. In fact, it's unwise to take anything for granted as covered by a policy you already have. Have your agent spell everything out in full detail.
A good approach to consider is “insurance against all perils except those specifically excluded within the policy." That is delivered by a special form HO3 policy, which covers the dwelling, other buildings on the property, liability, guests and medical protection. Should the house become uninhabitable, it would pay for additional living expenses while repairs go forward.
Homeowner's policies don't include flood insurance, which is available separately from the National Flood Insurance Program. You can consult with your agent about this. Cost depends on the amount of coverage purchased, what it covers, and the property's flood risk.
What's inside the house
On the special form, your personal property is covered, usually a percentage of what the home's insured for.
Like the house itself, there are differences in available coverage between replacement value and actual cash value for furnishings, appliances and the like. Policy buyers should think about —– and discuss with the agent —what coverage makes sense in their cases.
Without paying extra, you'll get some coverage for theft or damage on valuables like jewelry, furs, coins, silverware or guns. This is limited, though — for jewelry, the total might be $2,500. Very often luxury items or collections are worth far more than basic homeowner's coverage will include. For such items, extra insurance purchases may be required to safeguard their value.
Certain specialty items are worth thinking about in terms of specialized coverage — a high-end professional computer might be an example.
Saving some money
Accepting higher deductibles can produce more affordable premiums.
Bundling — buying auto, and homeowners policies from the same company or insurance agency— can cut the overall cost of insurance. You should also try to limit the number of small claims you make, which can increase your costs and could also make it harder to change companies.