Home Insurance Essentials

Gaurav Bhola, MSM, Managing Editor

Home insurance protects one of your most precious investments, your home. Herein, the right type of home coverage is one of the most important decisions you can make. When researching homeowners insurance, here are some factors you should consider in choosing the right homeowners insurance coverage.

Assess your coverage

Currently, more than half of all U.S. homes are underinsured by around 22%. If you have recently renovated your home or building costs have gone up, then you should look at getting more coverage based on these recent changes. By reassessing your residential real estate value, you may be able to get more protection for your home.

Know your home contents

Do you know how much your home is worth? The answer is probably a yes. Do you know how much your home’s contents are worth? No, most likely not. By itemizing your personal home assets gives you a head start in case of theft, fire, flood, or natural disaster damage.

Plug in the gaps

Discover if you have "cash value" or "replacement cost" coverage. Additionally, consider that majority of policies cap payouts at 50% of the total insurance coverage. The “extended replacement cost” insurance coverage pays out approximately 20% more than a standard home insurance policy.

Up your deductible

You can lower your home insurance premiums by increasing your deductible to $1,000 from $500 or $250. By raising your deductible to $1,000 you may save 15% to 35% in yearly insurance costs. And if you buy your auto insurance from the same company you may be able to cut your annual home insurance costs even further. It doesn’t make sense to put in a claim for home damage for less than $1,000.

Your claim history

Your home insurance eligibility and premiums are based on a five-year claims history in your home insurance files, similar to auto insurance. If you do have personal or property claims histories on file, you can get a free report once a year from ChoicePoint. ChoicePoint is the premier insurance records bureau in the nation.

Evaluate your insurer

Choosing the right homeowner insurance company can involve research. Go to your state’s department of insurance website and checkout the complaint ratio for each insurance company authorized to do business in your state. Also, checkout the credit rating for home insurance companies from independent credit rating agencies such as, A.M. Best and Moody’s. Don’t rely completely on your intuition, base your decision on statistics and facts.

Shop for the best rate

Don’t switch from an existing insurance carrier without doing your homework. This rule applies to new homebuyers as well. If you switch to a new carrier, you may lose out on customer discounts you may have earned over the years. However, this doesn’t mean you can’t shop around for the best deal.

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