How much coverage do you need?
Home insurance covers the financial loss you would incur in the event of a covered loss. In order to determine how much coverage you need, you must first determine how much repairs would cost. Then, you would add 10-15% to account for the cost of replacing items that are insured but are depreciated over time. For example, if you were to repair a broken window that costs $300, you would add 10-15% ($33-$50) to account for the fact that you would need to replace that window in the future.
-Structure - The cost of repairing or replacing your home’s structure is often the largest portion of your home insurance policy. The average cost of repairing a home after a natural disaster is between $100,000-$250,000. Depending on your state or county, your home may be required to be insured for its current value rather than its purchase price.
- Contents - The cost of repairing or replacing your home’s contents is typically much less than the cost of repairing your home’s structure. The average amount that is claimed for lost or stolen property is only $5,000. However, you may want to purchase additional coverage beyond the amount of your average loss in order to protect yourself against a high-cost claim. The cost of repairing or replacing your contents will depend on the type of items that are insured.
Different types of home insurance
There are several different types of home insurance policies.
-Structure-only policy - This policy only insures the structure of your home and does not provide any coverage for the contents. It is the least expensive policy, but only provides peace of mind for those who have very little in the way of belongings.
-All-risks policy - This policy provides coverage for everything, including the structure of your home and its contents, as long as the loss is covered by the policy. This type of policy is the most expensive but provides maximum protection.
-Specialty policy - This type of policy covers one specific thing, such as a flood policy or windstorm policy.
Deductibles and limits
- Deductible - Your deductible is the amount of money that you owe towards any covered loss before your home insurance policy kicks in. The higher your deductible, the lower your monthly premium will be. However, it is important to remember that a higher deductible means that you will be responsible for a larger portion of any covered loss.
- Limit - A coverage limit is the maximum amount of coverage that your policy provides. Many standard home insurance policies have a $100,000 limit on liability coverage. If you have a high-value residence or expensive personal items, you may want to consider increasing your liability limit.
Additional coverage options
Many home insurance policies provide additional coverage options that you may want to consider purchasing. These options provide coverage for specific situations and often come at an additional cost.
-Flood insurance - Floods are one of the most common causes of property damage in the United States. If you live in an area that experiences frequent flooding, you may want to purchase a flood insurance policy to protect against the expense of repairing damage from flooding. Flood insurance is available for both homeowners and renters.
-Liability insurance - A standard home insurance policy provides liability coverage of up to $100,000. If you have a high-value residence or expensive personal items, you may want to consider increasing your liability limit.
- Renter’s insurance - If you rent an apartment or a house, you may not be required to have a homeowners policy. However, you should still consider having renter’s insurance to cover your belongings in the event of a loss.
How to save money on home insurance
There are a number of ways to save money on your home insurance policy.
-Decrease your deductible - The higher your deductible, the lower your monthly premium will be. However, keep in mind that a higher deductible means that you will be responsible for a larger portion of any covered loss.
-Raise your deductible - Increasing your deductible can lower your premium by as much as 20%. However, be aware that if you have an accident, you will have to pay the full deductible rather than a percentage, as is normally the case.
-Eliminate unnecessary coverage - If you don’t own much, you can consider dropping items such as a garage, swimming pool, or earthquake coverage. However, keep in mind that earthquake coverage is only available in certain areas.
Finding the right home insurance provider
When you are shopping for a new home insurance policy, keep the following things in mind:
-Do your research - There are a lot of home insurance companies out there, so it is important that you do your research before settling on one. Start by getting a free online quote from various providers. Once you have a few quotes, you can compare each provider based on the price, policy coverage, and customer reviews.
- Review your policy - You don’t have to start the process all over again just because you have a new provider. Most home insurance providers will allow you to keep the same policy, provided there are no changes to your coverage.
- Ask questions - If you are unsure about any aspect of your policy, ask your provider. You should feel confident in your home insurance coverage, so don’t hesitate to speak up if there is something that is unclear.
