Insurance Considerations for Homeowners

Homeowners insurance can be an expensive investment and many mortgage lenders require it. You should ensure you purchase appropriate coverage.

Prior to shopping for homeowners insurance policies, it’s essential to understand your coverage options, deductibles and discounts. Furthermore, assess the financial strength of insurers as well as if combining multiple policies could save money.

Cost

Homeowners insurance provides financial security to your largest financial asset. Unfortunately, however, its costs can be high and rates depend on various factors including location, crime rates, weather patterns and materials used in construction of your home. Insurers also take into consideration which home construction and materials have been chosen which may increase or decrease rates accordingly.

Your credit score and prior claims history can also play a part in determining the cost of your policy, with higher scores paying less for their insurance premiums.

Make changes to your policy that will lower costs, such as raising the deductible on dwelling coverage or bundling policies with auto insurance for savings. Finally, enhance the security of your home with deadbolts, fire alarms and security systems – the latter may qualify you for discounts according to NerdWallet – while increasing personal property coverage by raising it further.

Coverage

Homeowners and renters insurance provide protection for both personal property and the structure of a building. Policies typically cover dwellings on an actual cash value basis while personal items can be covered on replacement cost (ie, what it would cost today to replace rather than their depreciated value). Furthermore, inflation guard riders may automatically increase coverage limits at policy renewal time to reflect inflationary costs.

As with renters insurance policies, both homeowner and renter policies provide liability protection; however, homeowners policies tend to provide more comprehensive protection as they cover structures like garages, sheds and gazebos located on a property.

Standard policies typically cover a range of perils, including fire, tornadoes and burst pipes. Some policies even offer additional living expenses if disaster forces you out of your home and reimburses any stolen items. Others feature ordinance or law coverage which covers losses due to changes in local building codes; pet liability coverage as well as earthquake protection are additional enhancements that might protect against earthquake damage.

Deductibles

Deductibles are the amount you must pay out-of-pocket before your insurer begins paying on a claim, either as a set dollar amount or percentage of insured value. The higher your deductible is, the lower your premiums will be; just make sure it’s something that you can comfortably manage should an incident arise that requires payment of claims.

Some insurance policies may contain separate deductibles for different forms of damage or coverage. For instance, your homeowners policy could contain a hurricane deductible which differs from its standard one.

To determine your deductible effectively, it’s essential that you take an honest inventory of your finances, including earnings, assets and savings. A knowledgeable independent agent can assist in helping you understand all the options available and offer quotes based on different deductible amounts; then it comes down to finding one you can afford both short term and long term in order to make an informed decision.

Agents

Homeowners must stay in close communication with their agents in order to secure adequate coverage for their property. Renovations such as kitchen upgrades or primary suite expansion may alter its insurable value and necessitate policy adjustments, while changes such as renting it out as rental units or switching occupancy from primary residence to vacation home may alter insurance requirements as well.

Independent agents provide customers with multiple policy options from various insurers to help them make more informed decisions about coverages and premium rates. They also keep records in order for customers to easily update information or change policies when needed.

Independent agents can also help homeowners understand how annual income impacts premium rates. While income does not typically play a factor, certain metrics do contribute, including credit score and claims history.