When you buy a home, homeowner's insurance becomes an instant necessity. Though anyone purchasing a home hopes to live in it for many years without filing a claim, odds are high that, in your lifetime, a disaster, either large or small, will affect your home. Even what seems like a relatively small incident can quickly add up to thousands or tens of thousands of dollars in damages. Few people have the resources to complete the massive repairs needed after a fire, flood or storm damage strikes. Without homeowner's insurance, their home and largest financial investment would be destroyed.
Homeowner's insurance was invented to protect people from losing their homes when disaster strikes. Imagine if the people whose homes are affected by hurricanes, tornadoes, or fires had no insurance. In a matter of minutes, their homes and everything inside of them would be gone. Even worse, they would then have no place to live.
Because of homeowner's insurance, victims of disasters have their homes, the property inside, and living expenses covered. Homeowners insurance allows them to rebuild their lives. Since homeowners insurance is one of the most important coverages, be sure to follow these 5 tips for selecting the right coverage.
1. Do your homework
Before selecting a policy, shop around with several insurers. Remember, not all insurers are alike. Always check their ratings. The most important factor is claims satisfaction. The last thing any homeowner wants is a bad experience with a claim.
Imagine having your home destroyed by a fire and then, to make matters worse, having your insurer be unresponsive or try to short you on your claim. A cheaper premium becomes more expensive when you have claim problems. A top-rated insurer will take care of you and your family during your time of need. They will not only handle the financial implications, they will also provide peace of mind.
Quality customer service cannot be overemphasized. 24/7/365 customer service is a necessity for homeowners insurance. Disasters often strike at the worst possible times, like the middle of the night or Christmas Eve. You need to know your insurer is there for you.
2. When buying a home, consider the homeowner's insurance implications
It's easy to forget about this factor when shopping for your dream home. In many cases, the homeowner's insurance costs may be similar between the homes you are looking at, but don't bet on it. Even within the same city, the neighborhood matters. Crime rates, building costs, and previous claims at that address all factor into your premiums, so do your research before signing the paperwork.
Location becomes a huge consideration when you move into an area prone to natural disasters. If you are moving to an area prone to earthquakes, floods, tornadoes, hurricanes, wildfires, or other devastating occurrences, check on the costs of homeowner's insurance.
You may be shocked by the premiums, or you may be more shocked to find you can't insure against certain disasters at all, or that you need to purchase special supplementary insurance, such as flood or earthquake insurance. Always make sure you are fully covered for any natural disasters prone to the region. A wildfire, hurricane, or flood can easily destroy an entire house.
3. Deductibles
Deductibles have an inverse relation to your premiums. The higher the deductible, the lower your premiums. It may sound like a higher deductible is better, especially if you think the likelihood of a home disaster is small. Remember, if you set the deductible too high, you may receive no coverage for smaller claims. For example, if a burglar damaged your garage door to get inside and stole several items. Also, should a major disaster strike, if the deductible exceeds the amount of cash you have on hand, you could find your family in hardship, or be forced to take on credit card debt.
A good rule is to always make sure that you have at least the deductible amount saved in an emergency fund. $1,000 is a popular deductible and works well, so long as you have $1,000 or more in savings. If you are cash rich and comfortable paying more out of pocket, you can save money on premiums with higher deductibles.
4. Love those discounts
Many homeowner's insurance companies offer discounts for behaviors and modifications that reduce claims risks. Your insurance company can provide a list of discounts, such as smoke detectors, fire extinguishers, burglar alarms, storm shutter installation, and water safety systems. There are also some surprising discounts available for things like organization memberships, good credit scores, and being a new home buyer.
Bundles are another way to save a bundle. Many multiline insurance companies offer discounts on homeowners insurance when it is bundled with auto, life and other policies. If you need car or life insurance anyway, why not try to save by bundling?
5. Know what your policy covers and excludes
Most homeowners policies have exclusions, so make sure you consider these when doing your comparison shopping. Common exclusions include land movements (earthquakes, sinkholes, landslides), power failures, war, government action, faulty zoning, poor workmanship, defective maintenance and flooding. Water damage from a plumbing issue, such as a burst pipe, is normally covered, even though flooding may be excluded.
Many people have the common misconception that appliances like air conditioners, heaters, dishwashers and washing machines are covered. Appliances are only covered if destroyed by a covered event, like a fire or pipe burst. They are never covered for mechanical breakdown.
Most homeowner's insurance policies cover damage to your home and property from certain events, including property outside your home. For example, if an item is stolen from your car, your homeowner's insurance policy will likely cover it. A good homeowner's policy also covers liability. If someone gets hurt on your property, you can be held responsible, regardless of fault. This could be the case even if they entered your property without your permission. With a good homeowner's policy in force, this is nothing to lose sleep over. You are covered from the unexpected.
