In an effort to gain better control of their expenses during the recession and recovery period, many consumers are re-examining their homeowner's policies to understand exactly what is covered and to ask two critical questions:
- Is my home adequately covered?
- Am I getting my money's worth?
The answers to those questions lie in gaining a fundamental understanding of how homeowners policies work.
The Basics of Coverage
Typically, homeowners insurance polices cover:
- the structure itself.
- personal property and possessions
- liability claims for people who live in or visit the home.
Common threats to the structure are included such as: fire, extreme weather, and theft. Any incident not not singled out by specific exclusion is generally covered. Expect to require a separate policy for contingencies like floods or earthquakes.
Personal Property and Possessions
Covering your possessions and personal property can be handled in many ways and may depend on a total value calculated at by the insurer. The best practice is to inventory your possession (making note of specifics like serial numbers) and then to decide if your basic policy should be augmented with riders to protect items that are particularly valuable or irreplaceable. These calculations should be reviewed yearly and adjusted according to what has been acquired or what has been removed from the home.
Liability coverage protects the homeowner against lawsuits by providing compensation for individuals who have been injured while on the property or whose property has been damaged while on the premises. Included coverage is usually capped at $100,000, an amount that can easily be increased in consultation with the insurer.
Paying the Lowest Premium
Homeowners are striving to achieve a good balance between the affordability of the coverage and its degree of comprehensive protection. Things to remember in attempting to lower your premium include:
- Raise your deductible as high as you possibly can, but make sure that you have the cash on hand to meet the figure you set in the event of a claim.
- Attempt to consolidate your coverage at one company to earn a discount. For instance, have both your homeowners and your automotive coverage with the same insurer.
- When calculating the value of the home, do not include the value of the land.
- Install as many security measures as practical such as deadbolts, smoke detectors, burglary alarms, or monitored professional alarm systems. Your efforts will be reward with savings of from 5 percent to 20 percent.
Do not start trimming your homeowner's insurance coverage without acquiring an understanding of how the policy works. If you and your family are feeling the pinch of the recession, the situation will only be made worse by damage to your home you cannot repair or the expense of a liability claim you cannot meet.