Before You Buy Homeowner's Insurance

In order to guard yourself from risk and liability, it is essential to invest in a homeowner’s insurance policy that will give you the protection you need.  Although such policies are not a requirement by law, any mortgage company will require this as a stipulation to receiving your next home loan.

Types of Policies

Several types of plans are available that include various optional riders dependent on your particular needs.  There are specific policies for older homes, mobile homes, condos, and anything from basic protection to high liability coverage.  However, a majority of owners will invest in something known as an HO-3 policy, because it offers protection for both the dwelling as well as your contents that are available in your home.  

For example, the HO-3 policy will guard the outside of your property from any of the open perils (i.e. threats or dangers) to your home and also named perils for your contents.  However, there will be a list of specific issues that the policy will not protect you from (such as earthquakes or water damage).  Uncovered perils may be added at an additional cost. 

On the other hand, others may be interested in reviewing the options available with the newer HO-5 policy.  This coverage takes the HO-3 a step further by providing open peril policies for both the home and also contents.  So essentially you would be protected for more items within your house, without having to prove that damage occurred under one of the named perils.

Other Important Factors

Next, there are liability limits.  In the event that damage would occur, this amount would provide the coverage necessary to help restore your home.  However, please keep in mind that this is not the same thing as the home’s actual value.  There are other things that you need to consider such as the land, possessions, living expenses (if you need to rebuild), or other structures that are located on your property.

Therefore, take the time to assess what type of limit you would need to help cover the total loss in the event of a major catastrophe.  Also, be sure to revisit your policy from time to time as the property appreciates, and/or you consider making changes and additions to the property.

Finally, it’s important to review the differences between actual cash value and replacement costs.  For those who have a lot of contents that hold a high value, it may be better to consider replacement cost coverage, which could be worth the added price.  This will provide a brand new replacement for all covered contents.  

On the other hand, for people who are less concerned with replacing everything at market value with comparable items, you may want to consider actual cash value protection for household items which will take into account depreciation.

Of course, this is only the tip of the iceberg when considering a homeowner’s policy.  Other things that can be considered include:

Jewelry Coverage

Personal Articles Coverage

Umbrella Coverage

Liability Claims Protection

So...take the time to schedule an appointment with a qualified insurance agent to discuss your needs and review what else may be available.  If you need names and numbers of reputable insurance agents, please feel free to contact me as well.