Home insurance plays a massive role in protecting your home and your family from possible financial distress caused by disasters or other unexpected events. Thus, having the right type and amount of coverage is essential.
Whether it’s your fifth or first time to buy a home property insurance, discussing these questions with your insurance agent will help ensure that you end up with a policy that offers you the value and protection you need, maybe even more.
1. What is homeowners’ insurance?
Homeowners purchase a home insurance policy to protect their homes from damage and disasters. What many don’t know is that there’s so much more to it than coverage for the physical and structural integrity of their home.
If it’s your first time to buy home insurance, don’t be embarrassed to ask your agent more information about your policy and what it can do for you. Standard homeowners’ policies do not only protect your home and your belongings; they will protect you and your families against certain liabilities as well.
2. What are the monthly premiums?
In insurance, “premiums” refer to the amount you’ll pay for your policy on a monthly or yearly basis. Upon meeting with an insurance agent, one of the first questions you need to ask is the price of their premiums and what they cover. Most insurance providers offer their clients several premium tiers to choose from.
One mistake that homeowners often make – especially first-time homebuyers – is that they go for the first insurance company they find. If you want to get excellent value for the money you pay on premiums, always shop around. Doing so will allow you to compare quotes from different insurers and help you find the best deal out there.
3. Does my insurance cover all types of disasters?
Many people assume that home insurance will protect them from every type of risk or disaster that could happen to their homes. Sadly, that is not the case. Your insurance will only cover specific types of perils, and only up to the amount indicated in your policy. Basic home insurance coverage typically includes loss and damages due to fire, explosion, smoke, hail, lightning, theft, and vandalism.
Aside from the dwelling coverage, insurance policies also include:
Personal property coverage to protect your personal belongings in case of loss, theft, or vandalism
Liability coverage to protect you and your family from lawsuits and medical liabilities in case of 3rd-party physical injury or property damage
Additional living expenses coverage to cover your temporary living expenses in case your home becomes unlivable due to severe damage caused by a covered peril
You may opt to increase your premiums or purchase endorsements to increase your coverage. Ask your agent about these options.
4. What kind of risks are not covered?
While you can rely on your home insurance to protect you from most common risks and perils, it has its limitations. Depending on the provider, policies may slightly differ in price and scope, but they generally exclude natural flooding and earthquake disasters. Those who live in a flood-prone or earthquake-prone area may purchase endorsements or a separate policy for these risks.
Also, the policy will not cover damages from war, nuclear explosion, or power failure. The same goes for intentional damage or those caused by neglect.
5. Is this amount of coverage enough to rebuild my home from the ground up?
Your homeowner’s policy should cover the expenses of a total rebuild, just in case your home is brutally hit by a disaster. After all, this is the whole point of having home insurance. To get a more accurate estimate of the possible reconstruction cost of your home, consider working with local agents, as they’re more familiar with the construction landscape in the area.
Also, make sure to find out whether your policy covers actual cash value (ACV) or replacement cost value (RCV). When you make a claim, an ACV policy will deduct the depreciation cost into the payout, while an RCV policy will not. It’s recommended to have your home and belongings insured at replacement cost value.
6. Is there a way to reduce my monthly premium? Am I eligible for any discounts?
One of the easiest ways to reduce your monthly premium is by increasing your deductible. You may also end-up receiving special credits from companies if your home is equipped with alarms and other safety installations.
If you’re a senior, a student, or a retiree, don’t forget to ask your agent if you’re qualified for any discounts. Many insurance companies offer discounts to specific demographics, but since they don’t usually advertise these, you have to make it a point to ask.
About the Author
Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.