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Learn About Homeowner’s Insurance
If you own your own home, homeowner’s insurance is an essential financial instrument to possess. If you have a mortgage on your home, chances are your bank or other mortgage servicer requires you to maintain a homeowner’s insurance policy on your house. Homeowner’s insurance protects you from damage or loss of the home due to fire or other disasters. It also protects your personal property inside the home up to the limit of your specific policy.
If the home you own is a condominium, you would purchase a special Insurance Policy instead of a homeowner’s insurance policy. If you consider buying a new home, research how much insurance on that home will cost when determining your ability to afford that home. Insurance such as this is an essential part of any homeowner’s financial strategy and there are many different policy types and competing homeowner’s insurance providers. Below is some helpful information about homeowner’s insurance, including some of the types available, the importance of reading your policy, and how to save on homeowner’s insurance.
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What is Homeowner’s Insurance?
Homeowner’s insurance policies are intended to cover every aspect of your home from the structure to its contents. Some policies do have exclusions to be aware of before you purchase them. However, insurers are required by law to explicitly and completely detail everything that is and is not covered by the respective policy and to communicate the policy’s specific liability limits.
Replacement Cost Versus Actual Value
There are two basic types of homeowner’s insurance coverage that cover the structure and its contents. Some policies cover these items for their replacement cost, which pays the actual cost to replace the respective items. Other policies cover these items for their actual cash value, which pays exclusively for the value of the property at the time when it was destroyed or damaged. In both cases, the policy holder’s deductible is subtracted from the covered amount.
Typically, the premiums for replacement cost policies are higher because the payouts on claims tend to be higher. Expensive valuables, such as furs, firearms and jewelry, may only be covered up to a limit that is less than their actual or replacement values. For these items, homeowners may want to purchase additional individual insurance or make certain their insurance policies endorse these items.
How to Save on Homeowner’s Insurance
As you search for the right policy for you, shop around because all policies and insurers are different. Find out if you can get any discounts for making your home more resistant to catastrophes or upgrading your home’s security to better prevent theft. Discounts on homeowner’s insurance may also be available if you are retired or over 55 years of age.
You may also be able to receive discounted group coverage through your employer or a professional organization to which you belong. Remember not to confuse rebuilding, replacement costs or current actual value with the cost you originally paid for the home. You may want to consider a higher deductible and bundling your auto insurance with other policies held by the same insurer to lower your premiums. You can also keep your premiums lower by maintaining a decent credit score.
