Choosing the right Homeowner Insurance

Choosing the right homeowner insurance

Homeowner insurance is an important part of your overall financial security. Because your home is likely the largest investment you'll ever make, it's critical that it be properly protected from disasters like fire and storm damage. Here are some important things to know when selecting homeowner insurance:

• Your mortgage holder will require it - While most states do not have laws that require homeowners to carry insurance, your mortgage lender certainly will. In most cases, mortgage lenders require that you carry replacement value insurance or insure the amount owed on the mortgage.
  
  
• You want at least 80% coverage - Replacement value of your home means the amount it would cost to rebuild your same home today. Your home should be insured for at least 80% of this replacement value to ensure that you'll get full coverage in the event of a catastrophe. Many insurance companies will not fully cover damage unless your home is insured to this value. Some insurance companies will also offer the option of insuring your home at cash value. This is the value of your home today, including depreciation.
  
  
• Consider your deductible carefully - A higher deductible will get you lower premiums, but you'll have to pay more out of pocket in the event of a claim. It's important to consider the right balance of premium costs and deductible amounts when choosing your homeowner's insurance.
  
  
• Consider the contents of your home - Your homeowner insurance policy automatically covers the contents of your home, including furniture, household items, etc. However, you may have special items that need special coverage. For example, most homeowner's policies insure jewelry up to $5000 (total - not per item). Therefore, if the total value of all your jewelry exceeds $5000, you may need a policy rider that provides additional coverage for these items. The same logic holds true for items like antiques and art. Be certain to go over any special items with your homeowner insurance agent as you're building your policy.
  
  
• Living Expenses Coverage- It's important to make certain that your homeowner insurance policy covers living expenses in the event that your home is damaged to the point that you cannot live in it for a period of time. You want your policy to cover items like hotel and restaurant bills, warehouse storage and rent.
  
  
• Medical Payments Coverage - This coverage protects you in the event that a visitor is accidentally injured, including by family members or pets, while on your property. It is specifically used to pay medical expenses related to the injury. It does not cover members of your family that live in the home, and it does not cover injuries related to any business activity in your home.
• Personal Liability Coverage - This portion of your policy protects you against a claim or lawsuit in the event of bodily injury or property damage to someone else due to your negligence. For example, if a tree in your yard falls on your neighbor's home, the damage would be covered by their homeowner's insurance, unless the tree was dead. If the tree was dead, your failure to remove it is considered negligence on your part, and you would be expected to cover the damages. The personal liability portion of your policy would pay for such damages.

Homeowner insurance can be confusing and expensive. It pays, therefore to work closely with your agent to make certain that your coverage fits your needs and your budget. It's also important to review your current coverage periodically with your agent to ensure that your policy continues to meet your needs.