While Homeowners Insurance is not the most thrilling product in your financial life, no homeowner should neglect it. Mortgage lenders require it, and if the worst happens you don't want to be literally left out in the cold.
Homeowners Coverage Checklist
Items covered in Homeowners insurance vary by policy and how much coverage you need to feel secure. Here are some of the typical items included in a policy. The premiums run higher as you add more protection.
Damage to both the exterior and interior of the house is covered in case of hurricane, fire, lighting, and other events as defined in the policy. Compensation includes replacement cost, for repair or rebuilding of your house. Damages due to earthquakes and floods are not covered, unless you add riders to your policy for these specific events at additional expense.
There are distinct levels of coverage available for rebuilding a house. Actual Cash Value refers to the value of your house after deducting depreciation. Replacement Cost is the actual cash value of the house without deducting depreciation, allowing for a house rebuilt to it's original value. Extended replacement cost is a higher level of rebuild insurance that covers rebuilding to the original cash value taking inflation into account.
Of course, the higher level of insurance you go for, the more you pay in annual premiums. While Liberty Mutual provides excellent homeowners insurance, their rates are on the pricey side, but they offer discounts should you purchase multiple policies. Amica offers decent customer support and affordable premiums.
Personal property damages to items such as furniture, clothing and appliances as well as other contents of your home are covered should they be ruined or destroyed in a disaster covered in your policy. Some valuables such as jewelery may also be covered, as per the language of the policy. The policy defines the amount and limits of reimbursement for personal items, usually up to 50 – 70% of the amount your house itself is insured for. As the insured, you make a list of your personal possessions and their value known as a "home inventory".
Should anyone sustain an injury on your property, or property damage or loss, liability coverage protects you against damages and lawsuits.
Living Expenses During Rebuild or Repair
Cost of rental property and living expenses while your house is being rebuilt or repaired may also be covered, depending on how much insurance you opt to buy.
Shopping Homeowners Insurance
Premiums vary widely depending on how much insurance coverage you purchase, your zip code, crime in your area, and condition and size of your house. Do some comparison on rates with several insurance companies for the same level of coverage. Ask for rates including replacement costs, personal property damage, liability coverage and living expenses. You may qualify for discounts through your job, credit union or other association. For example, top rated USAA Homeowners Insurance is available to members of the U.S. Military and their families. Check out the solvency and service reputation of each company. Read consumer review for frank assessment of performance. Solicit recommendations from friends and family. You will be prepared to make an informed decision on a homeowners policy.