Mar 13, 2018
Insuring Your Investment
Whether you are purchasing a new home or already have one it is very important you have the right coverage. If you are purchasing new you will need to purchase a homeowners insurance policy before the lender will allow the closing to proceed.Homeowners insurance premiums are often included in your monthly mortgage payments. Homeowners insurance is important to both the owner and the mortgage lender, because it protects your investment in your home and the mortgage lender’s collateral. Here are some tips on making sure you have picked the right company, coverage and maximize your discounts.
- Choose the right company
The best test of an insurer is how well it handles claims. Some major insurers provided significantly better satisfaction when it comes to handling claims than others. The single best predictor of how satisfied customers were was based on the company’s damage estimates. Lower-rated insurers tended to have a greater percentage of customers who disagreed with their damage estimates and felt their final settlement was too small.Ask your friends, check the Yellow Pages or contact your state insurance department. (Phone numbers and Web sites are on the back page of this brochure.) National Association of Insurance Commissioners (www.naic.org) has information to help you choose an insurer in your state, including complaints. States often make information available on typical rates charged by major insurers and many states.
- Don’t Underinsure
You can also save by avoiding out-of-pocket costs arising from coverage that’s inadequate to begin with. Eight percent of subscribers who filed claims found themselves underinsured. That problem is much bigger when a hurricane, tornado, wildfire, or earthquake makes a home a total loss.Don’t make the mistake of assuming that your coverage limits will automatically adjust to your home’s rising or falling market price. Fact is, replacement value, or the cost of labor and materials required to rebuild,is what you need to consider. That can be significantly higher than the market price your home will fetch.
Ask your insurer for a customized estimate of your home’s replacement cost, which should take into account its unique features, construction details, age, and any costs of meeting new local building-code requirements. You should review your coverage needs every few years.
Even if your coverage level is correct, a standard homeowners policy still leaves you insufficiently protected. If you want to protect against the surge in material and labor prices that often follow a natural disaster, you’ll have to buy an “extended coverage” rider, which adds up to another 30 percent to your replacement-value limit.
You’ll also pay extra for an ordinance or law endorsement rider to pay any extra cost of rebuilding your house in compliance with local building codes. Coverage for a sewer backup is also not included in a standard policy, but you can pay extra for it. To avoid paying out of pocket for damage, you’ll need additional policies for flooding and earthquakes. Also, you may need separate policies for hurricanes, wind, and hail if you live in a high-risk zone.
Coverage for your furniture, electronics, clothing, and other belongings is standard, but if you have expensive furs, jewelry, silverware, or artwork, they’re subject to coverage limits. You’ll need to purchase a special endorsement or floater to cover their full value.
Liability protection for visitors injured in your home or for damage that you, your children, or your pets cause to others is also standard. Coverage usually starts low, at $100,000; increase it to at least $300,000. The more assets you own, the more advisable it is for you to buy an umbrella or excess-liability policy with coverage of $1 million or more.
Of course, all those add-ons increase your total premium, but you can offset part of the cost by raising your deductible to $500 or $1,000, which reduces the premium. Make sure you have sufficient savings to cover the deductible if your luck runs out–and that includes the higher deductibles for hail, wind, and hurricanes.
A little homework will go a long way when picking out a policy. Don’t forget to ask about discounts for things such as bundling policies, military discounts, non smoking, structural and security improvements.