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consumerunderstandhome
Understanding
Your Homeowners Insurance
One of the biggest financial commitments individuals make is to move into
a home. But whether you are buying, have already bought, or are renting your
home, you need a good security system in order to protect your investment
and your belongings. One component of that security system is homeowners
insurance.
What
is homeowners insurance?
It's a comprehensive package of protection against financial losses relating
to your house and its contents. It also protects you financially from personal
liability if someone has an accident in your home or on your property, or
if you are away from home.
Why do
you need homeowners insurance?
First, if you're buying a home, banks and mortgage companies require you
to have this insurance before they'll grant a mortgage, so the lender's investment
is protected. Homeowners insurance also protects your investment in both
your home and its contents, and reimburses you under the terms of your policy
in case of a loss. Homeowners insurance provides liability protection in
case someone has an accident on your home or your property.
What
if you're a renter?
You still need insurance! Contrary to what some people think, renters are
not covered by the landlord's policy. If your apartment burns, the landlord
may be reimbursed for the cost of the building, but unless you have renter's
insurance, you will not be compensated for your loss.
What
if you don't have many belongings?
Think about this-what would it cost you to replace your entire wardrobe all
at one time? Or all of your dishes, pots and pans, linens, etc? Those "few
belongings" add up to quite a bit when you start replacing them
How much homeowners insurance should you have?
To make this decision, you must consider several things. One of the most
important factors is deciding whether to insure for replacement cost value
or actual cost value
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Replacement cost coverage
pays the amount it would cost you to replace or repair either your house
or its contents. It covers your home and personal possessions or both, up
to the limits of your policy, with no deduction for depreciation.
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Actual cost value coverage
covers your home and possessions at their cash value, less depreciation,
based on age, condition, time in use, and obsolescence. To be adequately
insured, it's very important to carry enough insurance for your home's replacement
cost.
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Don't make the mistake of
undervaluing what your home is worth to try and save a few dollars on the
premium. And don't forget to review your policy at least once a year and
increase your coverage as necessary to maintain sufficient coverage.
How can
you avoid being underinsured?
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Have your insurance agent
or a professional appraiser help you calculate the cost of rebuilding your
home in today's market.
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Ask about total home replacement
cost coverage or guaranteed replacement cost coverage. This option pays you
what it costs to rebuild your house at today's construction prices. Be sure
to have replacement cost coverage on your belongings, as well.
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Ask about an inflation guard,
an endorsement that automatically increases your coverage as the value of
your home increases.
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Find out about personal
property floaters to cover special items such as jewelry, art collections,
or computers
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Be sure your homeowners
coverage is up to date. Tell your agent about any improvements or additions,
as well as any unique architectural features.
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Maintain an up-to-date inventory
of your belongings and keep it in a location away from your home. This way,
you have an accurate record of what is in your home-instead of relying on
your memory of what each room contained when filing a claim.
What if I work at home? Do I need separate insurance?
You may need separate coverage to protect your home office equipment if you
have a home-based business. You may have some coverage for property used
for business under your homeowners policy, but it will usually not offer
liability and medical protection for injuries resulting from a business activity.
Ask your agent to advise you on the appropriate coverages you need.
Your daughter is leaving for college soon. Will
the belongings she takes with her be covered by homeowners insurance or will
she need her own policy?
Usually, your homeowners policy will protect your child's belongings as long
as her school residence is only temporary. If she establishes a permanent
residence away from your home, however, she will need her own policy.
How can you keep insurance costs down and still
have adequate coverage?
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Be an informed consumer-learn
about the different types of homeowners insurance and what they cover.
-
Comparison shop-check the
price for identical coverages from a variety of companies. Just be sure that
lower cost doesn't translate to less coverage.
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Ask about discounts-An insurance
company may give you a discounted premium if it writes more than one policy
for you, such as your home and car. You may also get a discount for safety
devices such as home security systems.
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Talk with your current insurance
agent-he or she is your best source of information and can advise you as
to your current coverage as well as any changes in coverage that might be
appropriate.
If you have a loss . . .
If you need to file a claim against your homeowners insurance, here are some
tips to make the process easier.
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Don't alter the condition
of your house before it is inspected by the adjuster. You may make emergency
repairs, however, to protect your property from further damage.
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Contact your agent or company
rep as soon as possible with all information relating to your claim.
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If a visitor to your property
has an accident, alert your insurance agent, regardless of who is at fault.
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Follow up your call with
a written explanation of your claim.
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Keep a record of all expenses
you incur as a result of property damage, including expenses involved in
making temporary repairs as well as temporary living expenses.
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Take photos of the site
after an accident or other disaster has occurred.
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