Nowadays, it seems like you can’t watch or open a news report without hearing harrowing stories of devastation and survival. Living through such an ordeal takes an emotional toll. But if you’re not prepared for the unexpected, the experience could also trigger financial disaster.
After making sure your home is well-built, suited for your environment and properly maintained, homeowner insurance is the best line of defense for your home, financial stability and peace of mind. Standard homeowner insurance policies include four main categories:
• the structure - purchase enough insurance to rebuild your entire home at current construction costs
• your personal belongings - take an inventory to determine how much insurance is needed – consider video taping or photographing your home and its contents to help document your possessions
• liability protection – don’t cut corners – this covers damage or injuries inflected on others in your home (or by your pet) – short-changing coverage puts you at risk of out-of-pocket expenses that could lead to bankruptcy
• living expenses – think about what it will cost if you cannot live in your home temporarily due to damage or reconstruction
Disasters that most policies cover:
• aircraft damage
• vehicle damage
Basic homeowner insurance policies do not cover floods, earthquakes, maintenance damage, or sewer back ups. Flood insurance is available independently from your standard homeowner insurance policy and is something many homeowners must consider. The National Flood Insurance Program, which is administered by FEMA, offers flood insurance that may be purchased at any time, even after a flood has occurred. The price of flood insurance, along with standard homeowner insurance, depends partly on how likely your home is to be damaged.
For example, with flood insurance, there are high and low risk areas defined by how close your home is to bodies of water. With standard insurance, your home is at less of a risk if it is near a fire hydrant or a professional fire department, or if the house has new (less than 10 years old) electric, heating and plumbing systems. To make sure your home is properly covered for a disaster, it is important to update your insurance policy regularly to keep up with improvements, major purchases, and increased rebuilding costs.
Insurance also covers home improvements. If you are remodeling your home:
• make sure that your home, the contractor, and subcontractors are insured properly (contractors can sue you if they are injured on the job and are uninsured)
• do not wait until additions or renovations to your home are finished to buy insurance- instead purchase insurance as soon as construction begins
• increase your insurance on personal belongings if you purchase valuable new items such as furniture, electronics, etc.
• consider adding a rider for luxury items, such as art, collectibles and precious gemstones/jewelry Tips for Saving Money on Homeowner Insurance:
• shop around - get at least 3 different quotes from different types of agencies, consider the credit worthiness of the provider as ranked by an independent source such as A.M. Best, ask friends for recommendations and check www.bbb.org to choose a company your can trust
• raise your deductible – the higher your deductible, the more you save on your premium
• research home and auto insurance from the same company - some insurers offer multi-policy discounts
• make your home more disaster-resistant - a waterproof basement, well maintained exterior including roof and gutters and proper drainage will all improve your odds against flooding
Five Common Mistakes to Avoid when buying Homeowner Insurance:
• Insuring the house for real estate value instead of rebuilding/replacement cost
• Choosing an agency based only on price - financially stability and good customer service matter
• Canceling flood insurance
• Neglecting to purchase renter’s insurance – even if you don’t own your home, you need to protect your personal belongings
• Overlooking the security - insurance rates may go down if your home has proper alarm systems and safety features