When it comes to home insurance, here's a few helpful tips:
Often times, homeowners are confused when it comes to choosing the right amount of insurance coverage they need. If you purchase a home with financing, lenders typically require a borrower to obtain home insurance. However, if you purchase a home with all cash, should you still obtain insurance?
Even though many states do not require homeowners to be covered by insurance, obtaining insurance is a prudent decision. Choosing the correct amount of insurance coverage for any potential losses or liabilities is an important To Do item for most homeowners whether or not they have a loan on the property.
A homeowners policy, often referred to as an HO-3, can be very useful to help with major repair expenses as a result of fire and other disasters as well as provide coverage for your personal assets should a visitor be injured in your home.
The following questions can assist you when deciding how much homeowners insurance is right for you:
- What would it cost to replace your home? If you had to rebuild, what would a contractor charge to build your home to restore it to its current state? Looking at property values isn't an accurate method because property prices tend to continuously fluctuate up and down.
- What are the weather hazards for your area? Find out if you will need flood insurance which is typically an add-on item as well as coverage for windstorm/hurricanes and other potential hazards.
- What amount of liability insurance is right for you? Consider your personal assets should a guest be injured on your property and decide to take you to court for damages.
- What additional assets do you want to cover? Items like expensive jewelry, paintings, etc.. These items if insurable, will require a special rider in addition to your standard home coverage.
- Do you have a pet? Consider your pet may injure another person
- Do you have a pool? Pools increase your risk of possibly injuring another person.
- Is your home located on or near a body of water?
When considering the total value of assets in your home, you will need to know about Replacement Cost and Actual Cost. Actual Cost or value means the current or today's value of an item if you were to buy or sell it. Many items lose value over time, so, the Actual Cost is not what was paid for an item, but today's value.
Replacement Cost however, is the value or cost of any given item if you had to replace it. This is the better option if available for higher quality coverage.
Umbrella policies are beneficial when total family assets are substantial in value. Choosing an Umbrella Policy in addition to auto and homeowners insurance provides additional coverage above the policy limits of the homeowners and/or auto insurance when damage claims exceed these limits. Umbrella Policies are designed to protect your net worth/ personal assets in the event of a disaster and are usually obtained by the same insurance company that provides your homeowners and insurance policies.
These are just some helpful tips when considering the right amount of insurance. You should have a detailed conversation with a reputable insurance agent to determine the correct amount of coverage best suited for you.