If you are a homeowner, you need to have home insurance. A standard home insurance should cover property damage caused by certain disasters, stolen or destroyed personal belongings, up to a limit, personal liability, which protects you and your family from lawsuits resulting from injury and damage you and your family may cause to others, and, medical expenses of a non-family member injured on the property.
When buying home insurance, follow the steps outlined below.
- Determine how much home insurance you need. You can calculate this by getting the replacement cost of your home. The replacement cost is the amount needed to rebuild your home. An acceptable insurance amount is 100% of the replacement cost of your home.
- Estimate how much it will take to replace the contents of your home. To do this, make a written and visual inventory of your home. This will help you estimate the cost of each item inside your home. If you simply do not have the time or patience to do this sort of inventory, you may hire a professional appraiser. Usually, standard home insurance policies have limits on the replacement and reimbursement of personal property. If you own something particularly valuable, say jewelry or paintings, it would be best that you purchase a separate insurance policy for it.
- Consider buying additional coverage. Standard home insurance policies only cover certain disasters, including hurricanes, fire and lightning. However, they do not cover natural disasters such as floods and earthquakes. If you live in an area where floods and earthquakes occur frequently, it would be wise to purchase additional coverage for floods and earthquakes. Also, consider buying extended-replacement coverage for the contents of your home.
- Choose between cash-value policy and replacement-cost policy. As mentioned above, standard home insurance policy covers for the reimbursement or replacement of personal belongings inside the house. Insurance companies will give you the option to take cash for any stolen or destroyed property. It will be computed as the original value of the property less depreciation. The replacement policy, on the other hand, reimburses you fully for the current cost of replacing the goods stolen or destroyed. However, you will have to pay higher premiums if you choose this policy.
- Get home insurance quotes. You can do this through your insurance broker, or online. Get multiple quotes from at least three different insurance companies with good financial strength ratings. If you have car insurance, get a quote from your insurer because it may give discounts if your purchase home insurance from it.
- Inquire about discounts. If you recently installed a security system at your home or made improvements to its plumbing and electrical wiring, ask the insurance companies whether you qualify for a premium discount.
- Choose your deductible. If you want to keep your premiums low, choose a home insurance plan that has a higher deductible.
- Review your policy. Alert your insurer if you made any improvements to your home or bought any valuable property for the home.