Three Things You Need to Know About Insurance

Protecting Your Home: Three Things You Need to Know About Insurance Are you a new home buyer looking to insure your life-changing purchase? Or are you a long-time resident shopping around for a better insurance fit? Either way, homeowner’s insurance can be a complicated business. You’re sure to have many questions, and it’s better to ask them all up front before being saddled with a policy that really doesn’t suit your circumstances.


To formulate the right questions, you need to do a little homework. Here’s what you need to know about common insurance terms, how much coverage you need, and when to file a claim. Learn the Language Before you start hunting for a suitable insurer, arm yourself with the knowledge of industry terminology. When you contact companies for quotes, you’re likely to hear these common terms: • Guaranteed Replacement Cost Coverage: The policy will pay to rebuild your home, regardless of cost. (This type of policy is rare in today’s market.)

• Extended Replacement Coverage: This coverage caps around 125% of your home’s insured value. (Even if construction prices outpace inflation, they probably won’t outpace it by 25%, leaving you with enough claims money for the repairs you need.) • Inflation Guarantee/Guard: Your home’s insured value stays current with the marketplace. (This guarantees that your home’s price keeps up with inflation.) • Actual Cash Value Insurance: What you’d get if you sold your home today. (This is usually a lower amount than what you initially paid.) • Replacement Cost Insurance: The amount you’d need to buy a brand-new item to replace your old one. (This is the smarter choice in coverage for your personal articles.) • Liability Coverage: Pays costs for someone injured on your property. (Standard policies offer $100,000 to $300,000 of liability coverage; supplemental liability coverage can increase your protection to $1 million or more.) • Deductible: The amount you have to pay before coverage kicks in. (Choosing the highest deductible you can afford usually lowers the cost of the premium (your monthly bill). Conversely, choosing a low deductible means that your insurer will cover more of your costs but increases your premiums.)


2. Determine Your Level of Coverage Your homeowner’s insurance policy should be enough to cover entirely rebuilding and refurnishing your home in the event of catastrophe. Ask a home builder to walk through your home and give you an estimate of what it would take to rebuild. Use that figure as a realistic starting figure to determine how much replacement coverage you’ll need, making sure to allow for any unique and/or expensive details that would increase the replacement costs. Protecting your possessions may mean opting for more coverage than your standard policy allows. Anything of exceptional value (such as a family heirloom, a work of art, or a piece of jewelry) often warrants separate coverage for an additional charge (something like an extra $10 on your monthly premium per $1,000 of value insured). 3. Choose Your Claims Wisely Once you’ve established your policy, remember to save your insurance for your major expenses. Avoid the temptation of filing a claim on every small home maintenance expense. Insurance companies don’t look favorably upon customers who file lots of claims.


In fact, this practice is likely to increase your monthly premium – and some homeowners even face cancellation of their coverage because their insurer sees them as high-risk. Don’t learn this the hard way. Consider this rule of thumb: If you can fix anything for less than $1,000, don’t file a claim with your insurer. Don’t ask for insurance to replace a gutter downspout that you can easily repair for a couple hundred dollars out-of-pocket. Reserve your claim for when you need a whole new roof.


This blog post is sponsored by David Tripp, owner of A Better Tripp Moving & Storage.

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