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Why Home Insurance Policies Aren't Created Equal

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 | May 19, 2015

One of the best pieces of advice when getting a new insurance quote is to have your old policy on hand. This ensures you will receive an apples to apples quote. After all what good is a new quote that saves you money if you’re inadequately covered? This is as true with home insurance as it is with auto insurance. Not all home insurance policies are created equal.

What do you need to make sure your home insurance policy fits your needs?  There are four basic steps to identify the policy coverage you need at the right price.

Here’s how:

Step One: Basic Coverage

Basic coverages on a home insurance policy include: structure of the home, personal possessions coverage, replacement costs, living expenses in the case of a disaster, and liability.

Structure coverage includes your home itself, but it also includes any attached structures, like a shed or barn. Including coverage for other structures on your home insurance policy helps protect your property as a whole, as well as the items inside those other structures. This comes standard on a home insurance policy, but if you feel lke you need more than the standard coverage you can add other structures on your property.  Those would be covered on a separate limit.

Typical replacement costs coverage will cover your belongings at their “actual cash value,” which reimburses you for the item factoring in depreciation.  Ask an agent about replacement cost coverage if you want to be able to replace the item that was destroyed.

Liability coverage is included on a home insurance policy to provide the homeowner coverage in the event of lawsuits for bodily injury or property damage (that you or family members cause to other people). It would help cover costs for court fees and your lawyer as well as any court awards, up to the limits of your policy.

Step Two: Beyond the Basic Coverage

There are always additional options to provide more extensive coverage on a basic home insurance policy, including guaranteed building replacement coverage, personal injury protection, ordinance or law coverage, Identity Fraud expense coverage and scheduled items.

Guaranteed building replacement coverage can help if your home is destroyed by a covered peril. The company will pay to repair (or rebuild) your home just as it was before the loss. It includes using similar items used in the original construction, even if it is more money. This coverage allows for a true rebuild of your current home, especially for those with brand new homes.

  • Some examples of covered perils are: Fire/smoke
  • Lightning strikes
  • Windstorms
  • Hail
  • Explosion
  • Vandalism
  • Theft
  • Damage caused by the weight of snow, sleet or ice

Personal injury protection can help cover costs associated with lawsuits such as invasion of privacy or wrongful entry. In some states this is required, in other it is optional. It can cover an insured's medical expenses regardless of fault, but it only applies to medical expenses, not property damage.

Ordinance or law coverage can help in the event that your home suffers a loss, but there is some part of your home left standing. This coverage will help take down that part and build it back if it was necessary to take down by ordinance or law.

Identity fraud costs can pile up quickly given the cost of potential lawyers and all of the paperwork fees alone. Identity fraud expense coverage can help with some of those costs.

Scheduled items refer to high-priced, specialty pieces in your home such as jewelry, antiques or art work. The personal property coverage on your home only has so much coverage which makes scheduling these items a good idea.

In addition, you may want to think about adding a policy such as flood insurance or earthquake insurance for your home. Even if not required, both can be a good way to cover your home if either occurred. Your home insurance does not cover either and it may be possible to get a policy for flood or earthquake insurance for much less money than you think.

Step Three: The Right Coverage for You

The first two steps cover your home and your items. Worried about more coverage in some of these areas or for other items or parts of your home? This is where having things like jewelry insurance or flood insurance for your unique situation may be necessary. Talk to an agent about some options that may be available to fit your needs. Step three is difficult to break down because everyone’s home and needs are so unique.

Some of the above basic coverage areas may not be enough for you and your home. On the other hand, maybe you evaluate your needs and you could cut some coverage. Before you make any decisions, think about everything in your home, the structure of your home, and all of the potential risks. This involves thinking of things like a house guest falling and hurting themselves and you end up in a lawsuit (liability coverage). What are your risks? What are your needs? Keep these in mind when speaking with an agent.

Step Four: Discounts (Everyone’s Favorite)

Some home insurance carriers will offer a discount for newer homes so be sure to give an accurate building date when talking with your agent. There are also a variety of discounts that you may qualify for, including:

  • Having a new roof
  • Walls and floors on the exterior that won’t burn
  • Roofs that have non-combustible materials
  • Having fire and smoke detectors, burglar alarms, fire alarms or automatic sprinklers.

How safe is your home? If you don’t have any dogs, pools, guns, or boats (greater than 15 feet and 10 horsepower) you have less liability on your hands and your home insurance premium will reflect that.

Combining your auto insurance and your home insurance with the same company is one of the best discounts that you can receive for both your home and auto insurance policies. Adding even more than that can reduce your bill further such as boat insurance, motorcycle insurance, and more.

Payment options, such as doing all of your billing and paperwork online or paying in full can also offer you discounts on your home insurance.

Source: eSurance and Progressive

 


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