For most Americans, their home is their most significant asset. If it isn’t the most important asset, then it is certainly up there near the top. In addition to its financial value, the personal property located within is usually “priceless.” This is where celebrations happen, where your children take their first steps, where you can relax at the end of a long day. It’s home.
Therefore it is extremely important to make sure that it is adequately insured. Additionally, if your property is mortgaged your bank may require you to carry a certain minimum level of insurance coverage. Be sure to understand the minimum requirements to avoid penalties or legal action.
There are two main criteria in selecting a homeowner’s insurance policy: liability coverage types and liability coverage amounts. Basic home insurance policies cover both property damage from certain events such as a fire, and also provide liability protection against personal injury. However, they do not cover all events (such as earthquakes or flooding).
Only you can determine whether you are at risk from these events and whether you would like to purchase additional protection to guard against them. If you live in Florida, you are likely wasting your money purchasing earthquake insurance, but you should certainly look into flood insurance and make sure that your policy covers other “natural disaster” related incidents (such as hurricanes).
Over the past fifty to sixty years, the homeowners insurance industry has seen a transformation. Before the end of World War II, homeowners insured each risk individually. If you needed your home protected from fire, that was a policy. If you wanted protection from theft, another policy. Vandalism, yet again, another policy.
As home-ownership became more prevalent in the booming years from 1950 to today, insurance companies realized that homeowners generally want certain “packages” of insurance. Homeowners policies were standardized, and while they may vary slightly among insurance providers (read the fine print!), they are generally comparable. There are a number of “standard” policies that cover most homeowners needs. However, insurance riders can also be added to a standard home insurance policy to protect specific assets or to guard against specific events.
Once you have determine which events you would like to insure against, you then need to decide on the amount of coverage. You can use property tax statements, home sales information or advice from a contractor or real estate professional to determine the cost to replace your home in the event of a catastrophic event. This will help you establish a minimum coverage level.
Be sure to assess your liability levels (and other features) annually to determine whether you need to make adjustments to your policy. If you have filed a claim, think about customer service from your existing insurance provider. Did they meet your expectations, or do you think you’d like to work with another insurance company. There are many top insurance companies available to you. Something else to consider during your periodic review is that changes in the home construction business (from contractor availability to raw material costs) can have a significant effect on the cost to replace your home; be sure to account for these factors.