Home Insurance

Home Insurance

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Home Insurance Basics

For most people, their home will be the single biggest purchase they ever make.  As such, it is very important that you have the proper type and amount of homeowners insurance to adequately protect your investment.  Your bank, mortgage company, or homeowners association will have mandated minimal levels of home insurance you must have, but that amount might not be adequate.  Remember, those levels are designed to protect the lender’s interests and are less concerned with having the necessary coverage to protect the full, fair value of the home including the possessions inside.

The first thing to understand about home insurance is which method of valuing property is your policy using – actual cash value or replacement cost.  Under actual cash value, your property is valued at the replacement cost minus the deprecation since you purchased the item.  Replacement cost is more expensive, but gives you more protection since it pays you what the cost today will be to replace the damaged, or lost, item.  Home insurance policies normally cover the contents of the house up to 40% of the amount your house is insured for, using the actual cash value method.  So, if you feel the contents of your house are worth more than 40% of the value, and/or you want the comfort of being reimbursed for the replacement cost, you need to talk to your insurance company about upping your coverage.

Homeowner’s policies also generally provide other types of coverage, including unauthorized credit card use and theft protection (even for personal items stolen far away from the home itself).  Also important, is that the standard homeowner’s policy excludes coverage for flood damage and earthquakes.  So, if you are looking for coverage for these types of events, make sure you add them to your policy.

Finally, have your insurance company give you quotes for different levels of deductibles.  Depending on many factors, including your tolerance for risk, you might be able to save a few bucks by choosing a higher deductible.  If the savings are meaningful, it might make sense to have the higher deductible plan, and if/when you have a claim, you can put the money that you are saving each year towards paying that higher deductible.

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Home Insurance Resources

Important: although the information presented on this page was provided by the experienced insurance specialists at InsuranceQuoteLink.com, it's use is strictly limited to educational and informational purposes. This information is not to be used in place of the consultation provided by a licensed insurance representative or legal advice of an attorney.