What to Consider When Choosing Homeowners Insurance
Homeowners insurance is something you would probably not consider as you may feel that getting one comes with the burden of having to pay another expense monthly. However, investing in this insurance is much more necessary than you may think—it offers peace of mind knowing that your home and belongings are covered all the time, and having it will help you pick up the pieces when an unfortunate event happens.
Naturally, when buying a home, you don’t want your hard-earned money go into waste in case of unforeseen circumstances. Hence, I would highly recommend buying home insurance but, before getting one, it will help if you take time to understand what is home insurance, what it covers and what it does not.
Here are some important information you need to know and points you may want to consider when buying home insurance:
- What is Homeowners Insurance?
Homeowners insurance, also known as home insurance, is a policy that covers your home and or its possessions for any loss or damages caused by circumstances beyond your control such as fire, theft, natural causes and accidents.
- What Does Home Insurance Cover?
Home insurance covers any loss or damages to your home in case of fire, theft and natural causes such as lightning, weight of snow, ice, sleet, along with disturbances caused by windstorms and hails. However, it is not safe to assume that all natural causes are covered by your home insurance. Although storm, earthquakes, landslides, sinkholes, hurricanes, floods and alike can be considered as acts of nature, they are NOT covered by home insurance policy—but you can always buy a RIDER to cover these exclusions. Home insurance also covers any potential damages caused by vehicles or airplanes, falling objects, smoke, riots, explosions and any incidents of frozen plumbing or air conditioning.
You can also extend your home insurance coverage to protect the possessions inside your house and your personal belongings, and include legal liability insurance to shield yourself from the risk of being sued or legally liable by the insurance company for negligence or in any circumstances that may occur at your fault.
While having homeowners insurance is not a mandatory step to own a house, some lenders require an insurance plan that will cover mortgage costs in the event of these adversities.
Be sure to choose a policy with a deductible you can afford to pay. In layman’s term, the deductible is the amount you need to pay out-of-pocket before your insurance company begins to pick up some of the tab. This amount is what your home insurance will not cover, so when you are choosing an insurance plan, make sure to ask your agent about it. Please note that a lower deductible also means a higher insurance policy rate, so better carefully do the math and weight your options before deciding on what plan to choose.
4. Actual Cash Value vs. Replacement Cost
There are two different ways by which your insurance company may estimate your claims for the damages or loss to your home: the Actual Cash Value or Replacement Cost plan. The Actual Cash Value (ACV) pays up for your home and possessions based on their market value before they were lost or damaged and, therefore, depreciation is factored by your insurance company when estimating your claims. With Replacement Cost plan, however, your insurance company is obliged to replace the cost on repurchasing your lost items and or rebuilding your home with the same value & quality of materials without devaluation. The replacement cost is often calculated as the initial amount you paid for the item or property.
I would advise you to read more about this clause as sometimes claims rulings vary from one court to another especially in terms of Actual Cash Value.
- Compare Before You Purchase
There are many different types of plans available to homeowners, and even to renters. It is wise to look at all your options when making a decision— compare policies for rates, deductibles, and the amount of coverage and limits. Choose a company that is trustworthy and has a reputation for standing by its customers.
Additionally, inquire about discounts and packages. For example, your agent may be able to offer you a percentage off your plan if you have a security system installed in your home, or you can get a discount for using the same insurer for your car and home.
- Study Your Policy
Be sure to study your insurance policy thoroughly before you sign any papers. Read your contract very carefully and have someone go over any parts that you don’t understand as you are locked in once you sign. You want to know exactly what your plan will and will not cover.
These are only basic information to know when buying home insurance, please get in as much research as you can before you make your decision, and do not hesitate to ask me if you have any questions.
For more on selling a home in Portland, OR and SW Washington, be sure to contact us at Urbane Realty Group. Our dedicated team of real estate professionals stands above the rest.
About the Author
Urbane Realty Group
Urbane Realty Author
Top real estate performer, Ted Williams is the owner of the Urbane Realty Group – a local, tech-savvy boutique real estate firm. Urbane Realty offers customers what they want by combining an open mind with the latest social media, marketing, and web-based technologies.