Homeowners insurance is not optional if you have a mortgage and is a very important decision you must make in order to protect what will most likely be one of your largest investments.
To get the right amount of coverage at the most affordable rate for your home, condo or rental property, you should plan on getting homeowners insurance quotes from multiple companies and choose the quote that is best fit for your particular situation.
There can be a fine line between having too much or too little insurance coverage. Nobody wants to pay for more insurance than they need but having too little coverage can be disastrous financially.
Knock on wood but if you suffer from a devastating loss from a fire, flood, theft or other calamity and you are under insured you are not going to be a happy camper! Of course if you over insure your property you will be throwing money out the window every year.
Types of insurance policies/coverage
Understanding the type of insurance coverage you need plays a large part in determining the policy that is best for your situation.
Cash value insurance
Actual cash value insurance only reimburses you for the value of your home in it’s current condition. So if your home is twenty years old there will be depreciation taken on all the components such as the heating system, windows, appliances, etc. If an event occurred where you needed to make an insurance claim you would be given far less money than if you had replacement cost coverage.
Replacement cost insurance
Having replacement cost coverage is the preferred method of insuring most homes today. With replacement cost insurance you would be reimbursed for the amount it would take to re-build your home new with the same existing quality of materials. Replacement cost insurance does not have a depreciation component.
Figuring out what the cost will be to re-build a home is where many home owners make the wrong insurance coverage choices. You MUST remember you are not insuring the market value of the property! Many home owners mistakenly do not take into consideration that you do not need to insure the land but just the buildings such as the home, garage, shed, etc.
When calculating the cost to rebuild your home you will want to look at your square footage, materials used, type of construction and any special features you might have.
Local builders or even some Realtors could be helpful information sources to guide you on what the going cost per square foot to build a new home are estimated at. If you own a 3000 square foot home and construction costs are running $150 per square foot you would be purchasing $450,000 in coverage.
One of the things you need to be cognoscente of is making sure you adjust your insurance policy when you make a large improvement such as a bath or kitchen remodel.
Last but not least don’t forget to insure the contents of your property. Most home owners insurance policies only cover your possessions for their cash value and not the replacement cost. In order to get replacement cost coverage you will need to purchase what is called an “endorsement”.
Checking your policy for exactly what is covered is important because valuables such as jewelery, silverware, furs, etc may not be covered. In that case you will want to add them to an insurance rider.
Someone falling on your property and suing you would not be fun. Often times folks are under insured in this department because they spend so much time figuring out the rest of their policy they neglect the liability coverage. Increasing liability insurance coverage is usually relatively cheap and well worth it in the event someone does happen to injure themselves at your home.
Obviously getting the right amount of insurance coverage for your home is critical if you actually have to make a claim! Secondarily nobody wants to throw money out the window especially with insurance coverage. See this article on home owners insurance savings tips for additional ways to save a few bucks.
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About the author: The above Real Estate information on Getting the right homeowners insurance coverage was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.
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