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What To Look For With Home Insurance

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Flood Cover And Actions Of The Sea

What Is Homeowners Insurance?

Many insurance policies now include flood cover as default, regardless ofwhere you live. Some insurers still include it as an optional extra, while a few insurers let you opt out, although this is usually at their discretion. If you live on top of a hill you might gripe about having to pay for cover you don’t need, but if your risk is low then flood cover will make up a negligible percentage of your premium.

Flood is the only insured event that has a standard, industry-wide definition: “the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal, or dam”.

Flood cover is included in most policies, even if you live in a low-risk zone.

What Are The Different Types Of Home Insurance

Now that weve listed what isnt covered, lets look at the different kinds of home insurance that are available and what they cover.

There are three main types: basic, broad and comprehensive.

  • Basic coverage is exactly that. It comes with a preset list of things that will be covered, like fire and smoke damage, theft and injury. It will cover only whats listed in the policy.
  • Broad coverage includes basic coverage with some extras, like coverage for your items and home structure.
  • Comprehensive coverage flips the list of named perils, so instead of telling you whats covered, it will tell you whats not covered. So unless its named as not covered, the assumption is that the event may be covered when you make a claim.
  • Endorsements are additional insurance coverage that you can purchase in addition to your policy.

Pay Only For The Amount Of Coverage You Actually Need

When youre deciding how much homeowners insurance coverage you need and what your policys coverage limits should be, take into account your homes replacement cost, and that of any outbuildings or structures. For a general idea of how to determine replacement cost, multiply the homes square footage by your areas building costs per square foot. An appraiser, insurance agent or real estate agent can help.

Second, inventory your personal property everything from clothing to tech to collectibles, sporting equipment, and linens or silverware. Remember to include your furniture and any outdoor equipment like barbecues. Its good practice to be as specific as you can, jotting down when and where you purchased expensive items. There are many home inventory apps that can streamline this process and keep you organized, and the Insurance Information Institute also has a number of helpful resources.

Once you have a rough idea of how much it would cost to replace or repair your property, youll know how much coverage you actually need and be able to choose a policy that suits your budget and risk tolerance, while taking into account the likeliest perils that may occur.

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Get Free Insurance Advice On Demand

Buying your very first home comes with a lot of responsibilities. You invest most of your savings in the down payment, and after going through a harrowing process of procuring a loan, you finally get to call yourself a homeowner. You then scrimp and save to pay off the mortgage.

Now imagine this its been a month since you bought a house and the weather forecast predicts a thunderstorm. You take all the precautions needed to protect your house, but significant damage is caused to it during the storm. There you stand, looking at your house and wondering what more could you do to prevent such a grave loss, and that it is!

Cyclones, floods, fire, earthquakes, etc., have become quite common and they pose a huge threat to your house. You can avoid financial loss from these natural disasters by purchasing a home insurance policy. This insurance policy covers a number of things and compensates you for any loss that you might face when your house has been damaged or was ransacked by a burglar.

There are several types of home insurance policies and each one covers something different. Check out our blog Homeowners Insurance Types for Condos, Standalone Homes, and Rented Apartments to know more about the standard and complex policies.

Expand Your Coverage With Endorsements

Home Insurance Checklist: What to Look for When Finding a Provider ...

Talk to your insurer if you have concerns about damage and events your policy doesnt cover. In many cases, you can add what are called endorsements which usually cost extra to provide more coverage.

Below are a few of the most common home insurance endorsements. Note that availability may vary by state and company.

Scheduled personal property covers a specific valuable item, such as a ring or musical instrument. An appraisal may be required.

Ordinance or law coverage pays to bring your home up to current building codes during repairs or rebuilding.

Water backup coverage pays for damage due to backed-up sewer lines, drains or sump pumps.

Equipment breakdown coverage pays for HVAC systems and large appliances if they stop working for reasons other than normal wear and tear.

Service line protection pays for damage to water, electric or other utility lines that youre responsible for.

Identity fraud coverage pays expenses associated with identity theft, such as lost wages and legal fees.

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How Can I Protect My Home And Reduce My Insurance

Many losses are preventable. Consumers should ensure their homes are properly maintained. In addition to ensuring all smoke alarms and carbon monoxide detectors are working, consumer can consider:

Preventing Fire Damage

Woodstoves and Fireplaces: Inspect and clean chimneys and stove pipes regularly and at least twice a year. Make sure that you have proper floor protection. Keep combustible materials away from fireplaces and woodstoves.

Furnaces: Ensure that they are serviced annually by a licensed technician.

Wiring: If you have an older home, have a licensed electrician check the wiring as older systems may have difficulty handling the energy requirements of todays appliances. Also consider that dishwashers, kitchen stoves, dryers and washers should be professionally installed to prevent electrical fires.

Electrical outlets: Dont overload or overuse extension cords.

Space heaters, candles, and hurricane lanterns: Dont leave them unattended and keep combustible materials away.

Preventing Roof and Water Damage

Roofs: Check for excessive snow buildups. Clean snow to prevent ice dams and collapse from weight. Make sure that the roof is vented properly. Periodically check for loose shingles and repair them.

Plumbing: Periodically check the pipes and hoses throughout your home and repair as needed. This includes items such as the water hose for your clothes washer, exterior faucets, water heaters and sump pumps and drains.

Managing the Damages of Winter Freeze-ups

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Get A Better Price By Comparing Quotes

As insurance costs can vary so much according to specific circumstances, we recommend getting insurance quotes from at least three companies, making sure that each one includes every coverage option you need, whether its standard to the policy or an add-on option.

Consider, too, opportunities to bundle your home insurance coverage with other policies, especially your auto insurance so you can earn discounts on each policy. Some companies also offer discounted rates for security systems or burglar alarms, smoke and carbon monoxide detectors, deadbolts and other safety measures around the home.

After youre well aware of all the coverage, bundling and discounts, establish a base for comparison. For example, try choosing the same amount of coverage, say, $300,000 on a $500,000 home then compare the premiums.

A higher deductible results in a lower premium, and vice versa. Bear in mind that, as with car insurance, insurance providers will also take your claims history into account when determining how much youll pay. Depending on your state and your insurer, a bad credit score or poor credit history can also raise your rates considerably.

Other Factors To Consider For Additional Coverage

Higher insurance costs force homeowners to look for options

Depending on your circumstances including where your home is located, the items in it, and whether its an older home you may need to expand your standard home insurance through extra-cost supplements to the policy, otherwise known as endorsements or riders. The add-ons offered vary by home insurance company and policy. But these are among those that are most frequently offered, and are worth considering depending on your situation:

Some other protections for your home, though, require policies separate from your homeowners one. These include:

  • Flood insurance. Home insurance does not cover damage from any water that does not enter your home directly such as rain or snow, for example. Protection against flooding requires a separate flood insurance policy. Such a policy may be wise even if you live in an area in which flooding has been relatively rare, especially given the effects of climate change. For more information, make sure to look up the National Flood Insurance Program.
  • Landlord insurance. Its possible your home insurance may cover occasional rental of your home or part of it check with your insurance company or agent. But any regular rental arrangements will likely require landlord insurance, which includes protection against both damage to your property and the liability risk to you posed by having renters.

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What Should I Look For When Buying Home Insurance

One of the most important things to look for when buying home insurance is guaranteed replacement cost. This is an evaluation that takes into account how much it would cost to rebuild your home from top to bottom in the event of a total loss.

When looking for home insurance, you should also keep water damage and sewer backup coverage in mind. Water has caused the most damage for homeowners in recent years, and it’s important to be protected!

Improve Your Home Security

You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. These systems aren’t cheap and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost and how much you’d save on premiums.

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When Youre Buying A Home Consider The Cost Of Homeowners Insurance

You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your homes electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it’s more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.

Check the CLUE report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.

Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you’ll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at www.fema.gov/nfip/. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority provides this coverage.

Choose Your Reimbursement Type

What to Look for in Home Insurance

Your next step is a crucial one: choosing how youd prefer your reimbursement if something were to happen to your home and belongings. Depending on the reimbursement arrangement you choose, the insurance company could reimburse you anywhere from a depreciated value of the damaged areas of your home to the full bill for a like-new replacement.

A cash value policy will reimburse you based on the actual cash value of items, with depreciation taken into account. For instance, if your 10-year-old TV is destroyed, youll get the cash value of a 10-year-old TV, not a new TV.

A replacement cost policy, by contrast, will reimburse you at a rate based on what it would cost you to repair or replace what was ruined. This is higher than the cash value rate, so you could actually replace that 10-year-old TV in the example above with a new TV. Note that the repair or replacement of some items, such as roofs and fences, are typically only reimbursed at a cash value rate.

If you live in an area with rapidly rising home prices or high building costs, or if you live in a new home with high-end finishes and fixtures, you might want to look into extended or guaranteed replacement cost coverage, which will ensure that you can rebuild your home even if doing so costs more than the policy limit.

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Types Of Home Insurance Policies

Insurance companies offer a range of home insurance policies with different levels of coverage against various risks and causes of damage.

Home insurance policies vary from one company to another. Its a good idea to shop around to get the best insurance for your needs.

Comprehensive

A comprehensive policy provides the most coverage. It covers all risks to your home and contents except for any risks named in your policy as exclusions. Also referred to as a special or all-perils policy.

For example, say your comprehensive policy names flooding, sewer backup and earthquake as exclusions. This means you dont have coverage for these named risks. However, your home and contents are covered for all other risks that arent named, such as fire.

Standard

A standard policy provides less coverage than a comprehensive policy. It only covers the risks to your home and contents that are named in your policy. Also referred to as a basic or named perils policy.

For example, say your standard policy names fire. This means youre covered for the risk of fire damage. However, your standard policy doesnt name flooding, sewer backup and earthquake which means you arent covered for these risks.

Broad

A broad policy provides a level of coverage in between comprehensive and standard policies. Also referred to as a broad-form policy.

For your home itself, a broad policy covers all risks except for any risks named in your policy as exclusions. This is similar to comprehensive policies.

No-frills

Estimate Your Homeowners Insurance Cost

So how much does homeowners insurance cost? In short, it depends. Each home is unique, and there are a number of factors that influence the cost of your homeowners insurance. Here are a few things to look for when comparing homeowners premiums:

What coverages do you have? Your standard homeowners policy is equipped with property and liability coverage. But a great thing about homeowners insurance is that you can customize your policy with optional coverages to match your needs. Additional coverage might mean a little higher premium, but the price you pay for protection is worth the cost considering what you might have to pay out of your own pocket if the unexpected happens.

How much would it cost to rebuild your home? The cost of your home insurance premium relates directly to the cost to rebuild your home and youll want to buy enough coverage to rebuild if you face serious damages. A home which costs $300,000 to rebuild will usually have a higher premium than a home that cost $150,000 to rebuild because its more valuable.

How much are your possessions worth? Your personal property also plays a role in the cost of your home insurance because youll want enough coverage to replace everything if your home is damaged or destroyed. High-value items, like jewelry, art and collectibles, have limited coverage, so you have the option to increase those coverage limits and make sure you arent underinsured.

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What Regulations Govern The Home Insurance Companies In Canada

Those that are dealing with an Insurance Company in Canada will be dealing with a Company that is governed by both levels of Government. It is these regulations that ensure that these Companies are going to honor valid claims made regarding their home insurance. The Provincial government regulations oversee

  • How these Companies conduct themselves in the industry
  • The way that rates are set for premiums
  • Brokers conduct
  • Sales Practices

Being as each province sets their regulations, it means that home insurance can differ in each province.

Why You Can Trust Bankrate

A beginner’s guide to home insurance

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and reviewed by subject matter experts, who ensure everything we publish is objective, accurate and worthy of your trust.

Our insurance team is composed of agents, data analysts, and customers like you. They focus on the points consumers care about most price, customer service, policy features and savings opportunities so you can feel confident about which provider is right for you.

  • We guide you throughout your search and help you understand your coverage options.
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