Your home is the setting for many of your most important memories and treasured moments.
It’s also one of your largest assets, so adequately insuring it is important. And if you financed your home, insurance also protects the bank or mortgage company who loaned you the funds to purchase your new home.
In addition to insuring the structure of your home, you’ll want to protect all of your furnishings and personal property from theft, damage, fire, natural calamities or other losses. A home insurance policy helps take care of you financially in case of damage to your property.
Just as homes come in different sizes and types, so do insurance policies. Whether you own a condo, a single-family home or a townhome, there’s a policy to meet your needs. There’s also insurance for renters – good to keep in mind if you rent while building your new home.
If you want to take advantage of the lowest home insurance rates, a good place to start is one of the many online insurance websites that offer quick, free and instant quotes from several different insurance companies simultaneously. This will help you compare costs side-by-side so that you can select the best policy at the lowest cost.
While online sources can quickly give you a feel for the price range to look for when you buy insurance, you’ll most likely want to discuss your specific needs with an experienced insurance agent, to make sure that you have the right amount of coverage for the home itself and for your furnishings and personal property. (More on that below.)
The Cost of Homeowners Insurance.
The following are the major factors an insurance company will typically consider to determine the cost you’ll pay (known as the premium) for coverage:
• The square footage of your home.
• The number of rooms.
• The age of your home.
• The city or town and state where your home is located.
• The building materials used to construct your home.
• Your home’s proximity to the nearest fire station.
• The type of heating system in your home.
• The current condition of your home.
• The number of people living in the home.
In addition to standard homeowners insurance policies, consider coverage for damage from floods and earthquakes. Neither is typically covered by standard home insurance policies. Your insurance agent can help you understand the relative risk of flood and earthquakes in your area and help you decide if such additional coverage makes sense for you.
If you’re living in a rented house, you’ll want to cover your personal belongings. Your landlord should carry home insurance to cover the home itself, but that policy will not cover your personal property. Renters insurance is needed to protect your belongings. In many cases, your rental coverage will also include liability protection as an additional benefit.
Make sure your coverage is adequate and current – and consider a home inventory.
It’s always wise to consult your insurance agent beforehand to select the limits in your insurance policies so you have adequate coverage. Make sure to keep your agent informed if your needs change so you can decide whether to update your coverage, as well.
You may also wish to consider purchasing replacement cost coverage, as opposed to current cash value.Your agent can give you a rate quote either way. While a policy that covers replacement cost can cost slightly more, it may make sense if you want to be reimbursed the true cost to replace something, as opposed to its depreciated value over time.
It’s also a wise precaution to make a simple written and visual inventory (such as photos or video) of your possessions in case you need to file a claim.
Place a copy of this in a separate and secure location (such as a safety deposit box in your bank) so your inventory records are not lost if your home is damaged. See below if you have unusually expensive assets. You may need a separate Personal Property policy or rider.
Managing Your Annual Home Insurance Premiums.
While it’s important to have sufficient coverage at all times, most of us also wish to minimize the premiums (or cost) of the insurance coverage we buy. If you want to reduce your premiums for homeowners or renters insurance:
- Consider increasing your deductible
- Keep in mind your out-of-pocket cost, before coverage kicks in, also increases.
- Maintain a good credit history. Always good advice, it can also lower your premium.
Don't forget to ask your agent about discounts. Many companies will reduce your premium:
- If you have a fire and/or burglar alarm; tell your agent if your system is monitored.
- If your home has fire sprinklers or fire extinguishers.
- If you’re retired or above a certain age.
- If you purchase auto insurance and home insurance from the same firm.
Additional Coverage for Personal Property.
Talk to your agent about how much coverage you need for personal belongings. Most homeowner policies include some coverage for clothing, furniture, household goods and other possessions. That level of coverage is often set at a specified percentage of the value of the home itself. While that’s arbitrary, for many people, this coverage is sufficient.
If you have items of unusual value – such as antiques, artwork, jewelry, rare musical instruments, or a collection of signed first edition books – you may want additional coverage. Your insurance agent can help you decide what level of coverage is needed and also help you select the right policy.
You worked hard to select the right builder and to design and furnish your home. You invested time to find the right mortgage. Taking care in selecting your insurance coverage (and keeping it up to date) will protect you, your family, your belongings and your home.