| Homeowners insurance also provides coverage for liability claims,
medical payments to third parties, and legal costs if a lawsuit is
brought against you. The most common amount of liability coverage
included in a homeowners policy is $100,000, but you may need much more,
depending on your circumstances. |
| What's not covered? |
| Read your homeowners insurance policy to find out exactly what is
and is not covered. Do this before you suffer a loss, so you won't be
surprised. Most insurers exclude damages caused by an act of war,
nuclear accident, flood, earthquake, and terrorism, although you may be
able to purchase special policies or endorsements that will cover these
events. |
| A diamond is forever. Or is it? |
| Most homeowners insurance policies limit coverage for certain
high-priced or hard-to-replace items. Additional endorsements or
floaters will be necessary to protect items like engagement rings,
watches, furs, antiques, and other valuables. You'll need to have each
item appraised. |
| How much is enough? |
| Mortgage lenders require that borrowers purchase a minimum amount of
homeowners insurance (typically equal to the appraised value or the
purchase price of the home). But this is often not the amount of
coverage you truly need. Instead, find out how much it would cost to
rebuild your home, and consider insuring it for that amount. |
| You get what you pay for |
| Are you willing to pay more to have damaged personal property
replaced? If so, consider purchasing replacement cost coverage with your
homeowners insurance. When it comes to valuing property, insurers
generally use one of two methods. The first, actual cash value, pays you
an amount equal to the replacement value of the property, minus
depreciation for the years you owned the item. The second, replacement
cost, is more expensive, but it pays you the full value of the item
today, so that you can replace the old item with a new one. |
| How deep are your pockets? |
| To save money, consider choosing a deductible of $250, $500, or even
$1,000. In the event of a loss (e.g., water damage from a leaky roof),
you'll be required to pay this amount out of your own pocket before your
homeowners insurance takes over, but in the meantime, you'll save on
premium charges. |
| Sound the alarm |
| Don't forget to tell your insurer if you have a home security system
(e.g., fire, burglar, emergency). Most insurers offer discounts for such
safety features. You may also qualify for a lower insurance premium if
you live near a fire department or hydrant, own a newer home, own a home
built out of fire-resistant materials, or get your auto insurance from
the same company. |
| Shop around |
| Get quotes from several insurance companies when shopping for
homeowners insurance. But remember, the lowest price does not always
equal the best deal. Compare the coverage each policy offers, and check
with your state's department of insurance to make sure that each company
you're evaluating has a good reputation in the industry. |
| Please note that this description/explanation is
intended only as a guideline. |
