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Video — 7 Tips On Choosing Home Insurance

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Home insurance is complex and mistakes can cost you. Consider these great tips in choosing yours. One, be familiar with your claims history. The more claims you filed, the more expensive your premium will be. Two. If you're still shopping for a home, consider or compare how each home's size, neighborhood, and other factors such as construction materials might affect rates. Three. Research and read reviews of insurance companies thoroughly. Four. Compare policy options for add-on coverage for any special needs for your specific. Five, Make sure your plan includes loss of use coverage. This covers your expenses while your home is being repaired after an event. Six. Check with your current auto insurance or life insurance provider. You may get a loyalty deal on your home insurance. Seven. Ask friends and family about their home insurance providers and. A great agent is your best ally.

How To Find The Right Policy For Your Situation

"Could I afford to start over from scratch if my house and everything in it were destroyed tomorrow?"

Here are 7 steps to finding the right homeowners insurance policy, as well as mistakes to avoid.

Your home is probably the most expensive thing you own, so you want to make sure you have enough insurance to replace it if the worst happens. When shopping for homeowners insurance, you shouldn't make the mistake of not getting enough coverage or signing up with a company that can't pay claims. But many customers focus on the lowest rates and don't think about how important it is to have enough coverage and good customer service.

You should do your research to find an insurance company you can trust and buy coverage that fits your needs. By looking around, you can find the right coverage at a price that is competitive. We'll walk you through everything you need to know step by step.

What's homeowners insurance?

Homeowners insurance protects you from financial trouble if you lose your home or someone gets hurt on your property and sues you. It's not required by law, but if you have a mortgage, you have to do it. In any case, it is a good idea to get homeowners insurance to protect your home and your finances.

Your home and your personal belongings are protected by standard homeowners insurance. It also covers liability and extra living costs if your home is damaged and you can't live there. Floods, earthquakes, normal wear and tear, and expensive jewelry or electronics are not covered by homeowners insurance. You can buy separate coverage for these things.

Coverage levels for home insurance

Make sure that your coverage limits are enough when you buy homeowners insurance. Most insurance companies offer three types of coverage: actual cash value (ACV), replacement cash value (RCV), and guaranteed or extended cash.

The ACV coverage will make sure that your property and belongings are covered at their depreciated value. For example, if your TV is stolen, you will get its value minus how much it has lost in value. The cheapest policy choice is the ACV.

With RCV, your insurance company will pay you the current market value of your home or personal belongings to replace them. For example, if a fire damages your kitchen, the company will pay to replace the things in your kitchen and the structure of your kitchen with the same or similar materials, minus your deductible.

Guaranteed cash coverage, also called extended cash coverage, is an endorsement that protects you from inflation, which can quickly make materials and construction costs go up. So, your cost to replace it might not be enough when you need it. An inflation guard add-on will automatically cover up to 125% of your homeowners policy, making sure you are always covered. Most of the time, you have to pay extra for this endorsement.

How to get the right home insurance in 7 steps

Step 1: Decide what you want to be covered.

Start by figuring out how much it would cost to rebuild your home, how much your personal belongings are worth, and how much your other assets are worth. If you live in a high-risk area, you may also want to cover extra buildings like garages or sheds and buy flood or earthquake insurance.

Step 2: Figure out how much insurance you need.

  • Find out how much it would cost to replace your home: The Insurance Information Institute says that the local cost of building and the size of your home are two of the most important factors that affect how much it will cost to replace your home (III). How much coverage you need will also depend on the materials used to build the outside and inside of your home, as well as special features like garages or a pool.
  • There are several ways to figure out how much it would cost to replace your home. You can either get an estimate from your insurance company or use a calculator from a third party. You can also hire an appraiser in person, which may be more expensive, or you can do it yourself by multiplying the cost of building a house in your area by the size of your house in square feet. Use more than one method to get the most accurate cost of replacement. This will make sure you are fully covered.
  • Do an inventory of your home: Making a detailed list of your belongings will help you figure out how much home insurance you'll need. After making a list of everything in your home, think about whether you want to insure your personal belongings for their actual value or their replacement cost. Take note of things like jewelry or expensive electronics that cost a lot. If you have things in your inventory that need more protection, you might want to buy a personal property floater or endorsement.
  • Figure out how much extra insurance for living costs you'll need: Most policies will pay for you to live somewhere else while your home is being fixed up after a claim. The III says that the cost of paying for living expenses while repairs are made is equal to 20% of the cost to replace the home. Check with your insurance company because the limits on extra living costs vary by provider. You can pay more money to get more coverage.
  • How much liability insurance do you need? You should buy enough liability insurance to cover your assets. Most home insurance policies have a minimum of $100,000, but the III recommends getting at least $300,000 to $500,000 worth of coverage. If that isn't enough to protect your property, you might want to buy an umbrella policy or extra liability coverage.

Step 3: Have information about yourself and your home ready.

Having your personal information and information about your home on hand can help you get home insurance quotes faster.

  1. Name, date of birth, marital status, and contact information are examples of personal information.
  2. Simple facts about your house: Address, how long you've lived there, what kind of home you live in and if it's your primary residence, if there's a mortgage on the property, the year it was built, square footage, number of bedrooms/bathrooms, number of stories.
  3. Who built your house: What your home's building, exterior walls, and roof are made of, how it heats or cools, and what kind of foundation and construction it has all make a difference.
  4. Safety: How far your home is from the closest fire station and fire hydrant, if you have home safety systems.
  5. If you need more protection: If you run a business out of your home, you can't have jewelry or high-end electronics, pets, swimming pools, or trampolines.

Step 4. Get quotes

Experts suggest getting prices from at least three different businesses. Start your search by getting suggestions from friends and family. You can also call your state's insurance department and ask for rates and the number of complaints made about major insurance companies.

To compare quotes, you should know what your policy covers so you can compare apples to apples. A standard homeowners insurance policy will cover the house, your personal belongings, your liability, and extra living costs. Make sure your quote includes any extra coverage you decide to buy.

You should also make sure that your coverage amounts and deductibles are the same across all of your quotes. A deductible is the amount you have to pay out of your own pocket before your insurance company will pay out your claim. Your premiums will be higher if your deductible is low. Also, you need to make sure that your coverage amounts are the same everywhere. You don't want to be underinsured if you need to rebuild your home, replace your personal belongings, or get sued for accidents that happen on your property.

Step 5: Find out what discounts you can get.

Even though you shouldn't forget about your coverage to get a lower rate on your homeowners insurance, there are still ways to save money. Here are a few of the most common discounts that home insurance offers:

  • Multi-policy discounts: If you bundle your homeowners insurance with another type of insurance, like auto insurance, you can get a discount.
  • New home/new home buyer discounts: You may be eligible for a discount if you just bought a new home or if you just bought one. Different insurance companies have different ideas about what a "new home" is.
  • Automatic, pay-in-full, electronic funds transfer, and paperless discount: Choose a way to pay and get a discount.
  • Claim-free discount: If you have never made a claim on your homeowners insurance, you can get a discount.
  • Loyalty discount: If you have been insured with the same company for a number of years in a row, your provider may give you a discount.
  • Home safety discount: If you have devices like burglar alarms or smoke detectors installed, you may be eligible for a discount.
  • Smoke-free discount: People who don't smoke can get a discount if they don't smoke at home.
  • Get a discount if you improve the quality of your home by upgrading your roof, electrical, heating, and plumbing systems.

Step 6: Find out how trustworthy each company is.

Find out how reliable an insurance company is to make sure you get the best deal. Ratings from independent agencies about an insurer's financial strength can help you figure out if it will be able to pay you for a claim when you need it. AM From A+ to F, Best gives insurance companies letter grades. If a company has a rating lower than a B, it is not financially stable and can't pay claims reliably.

You can also find out how trustworthy a company is by seeing how happy its customers are. J.D. Power's home insurance customer satisfaction survey uses a scale of 1,000 points to rank the biggest insurance companies.

Step 7: Finalize your policy and buy it.

Once you've chosen the right policy for you, make sure all your information is correct before you sign. Keep in mind that your insurance company may want to inspect your home to make sure that the replacement cost coverage and property information on your application are correct.

You also want to know how your insurance premiums will be paid. Most of the time, you will pay your insurance premiums to your home insurance company or mortgage lender. Your homeowners insurance company will be the one to help you pay your premiums in full or in installments. If you have a mortgage lender, you may have to pay premiums through an escrow account along with your monthly mortgage payment.

Last, you'll have to pick a date for your policy. Tell your mortgage lender if you are getting a new policy.

1. Choosing the least expensive plan

An insurance policy for your home should protect you and pay for the costs of rebuilding if you need to. But if you choose the cheapest coverage, you might not have enough to pay for a complete loss at your home. Pannhausen says that after a loss, your home will probably be your biggest expense and one of your top priorities. You may also lose money if you don't have liability insurance and have to pay for someone else's medical bills and your own legal defense out of your own pocket.

2. Not changing the amount of coverage you have every year

Your replacement cost may not be the same as it was last year because of things like rising prices. Make sure you update your insurance coverage every year so that there are no gaps in your coverage.

3. Not going shopping every year

You are not stuck with just one insurance company. Every year, you can switch to a different provider with better rates. Most companies will let you cancel your policy even if it is still in effect, and they will return any premiums that you haven't used. Be aware of any fees your insurance company might charge you to cancel, and if you need to, tell your mortgage lender that you are canceling.

4. Guessing wrongly how much it will cost to replace your home

Many customers choose their replacement cost based on how much they paid for their home, which could leave them underinsured. It's important to get a good estimate of how much it would cost to completely rebuild your home. Pannhausen says that when you talk about the changes you've made to your home, you should think about new and expensive features and be honest.

How much does homeowners insurance cost?

When figuring out how much your home insurance will cost, insurers look at your home's size, the year it was built, the quality of the building materials, its location and its risk, any unique features on your property, and more. They also check to see if you can get discounts for having a safe home or for having more than one policy with them.

Your homeowners insurance premiums will depend on your specific situation, so it's best to get an estimate online or talk to a homeowners insurance agent.  The average cost of HOI premiums in 2019 was $1,272.

Even though cutting your coverage to save money is not a good idea, there are still ways to save money on your policy. Here are a few ways to save money on your insurance.

  • Compare prices: Use an online broker or an independent agent to find an insurance company with the best coverage and the most competitive rates. If you bundle your home, auto, and umbrella insurance policies, you may be able to save a lot on your insurance.
  • Make your deductible higher: How much you pay for your insurance premiums can depend on how much your deductible is. The higher your deductible, the less you have to pay each month. Keep in mind that deductibles can be taken out of the total amount of your coverage. For example, if a storm damages your home and the insurance company says the repairs will cost $15,000. Your insurance company will pay you $14,000 if your deductible is $1,000.
  • Benefit from discounts: Discounts can also cut your premiums by a lot. On their websites, insurance companies usually list the discounts they offer. Contact your insurance agent to find out if you qualify for discounts that aren't as well-known.

You want to make sure you have enough money so you don't get into a lot of debt and have trouble paying your bills.

Adan Harris
January 27, 2023
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