Your home is likely your most valuable asset–make sure it is properly protected. Home ownership isn’t always a walk in the park and insurance is there to help you in some of the worst of times. While your CLUE Report will help determine the kind of coverage you can buy, it is ultimately your responsibility to know what the policy covers. And remember, insurance agents are salesmen and typically work on commission. This isn’t a bad thing, but be aware of what type of coverage you actually need so that you can spot it when you’re being sold something you don’t truly need.
This has been a topic of renewed discussion recently with all of the floods and severe weather in the midwest. Many people had assumed that they were in no danger of a flood, and now that their home is under water, they find their policy isn’t going to cover the damage.
1. Review your policies annually. A walk-through of your coverage needs with your agent may identify other coverages (i.e., jewelry, artwork, etc.) that you need, as well as ways to save on premiums such as bundling auto and home insurance coverage together with one provider or requesting higher deductibles to help contain your costs.
2. Identify risks you face that are not covered by your homeowners policy. Disasters such as floods and earthquakes need a separate policy or riders to protect your home if tragedy strikes.
3. Understand how much coverage you have. Many homeowners believe their insurance policy will replace their damaged or destroyed property regardless of the amount of damage incurred. Remember, it is generally not your home’s market value that is covered, but rather its replacement cost. Home additions and major kitchen or bath remodeling projects can add significant value to your home, which may not be covered by your current policy. It is important to that your coverage is sufficient, based on your home’s replacement cost.
4. Do your homework when shopping for insurance. Get quotes from different carriers. Since rates can vary, make sure you compare coverage on an apples-to-apples basis so you can spot when a lower price really just represents less coverage. Consider higher deductibles to help reduce your premiums or ask if discounts are available for installed safety and security devices such as smoke detectors and alarms.
5. Research carrier performance. Ask your friends and neighbors for references. Also research the financial strength of carriers through independent third-party sources such as state insurance departments, A.M. Best, Standard & Poor’s, and customer satisfaction ratings at the J.D. Power Consumer Center.
If you are looking to buy your first house be sure to check out these mistakes you can’t afford to make when buying.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
Doing your homework by researching can prevent a lot of questions. There is usually a lot of information available online.
Rob, you're right on when you say: "Price is important but the lowest price is not always the best as it may have restricted coverage. It is important to shop around to get the best combination of price and coverage. A good insurance broker can really help with that. "
Sitting down with your insurance agent to understand exactly what is best for you and your family, not what is cheapest, is what the goal should be. Shopping for a broker that understands just that, is just as important as shopping for the best value.
Thanks for the check list. I will be doing my yearly check to make sure that my property "investment" is all in order.
Be aware of the premium you’re charged and if it goes up see if you can get a better deal. I got shafted by my former insurance company for not paying attention.
Jeremy, this topic is very good. Many people do not realize that there are special limits of coverage for personal property.
Price is important but the lowest price is not always the best as it may have restricted coverage. It is important to shop around to get the best combination of price and coverage. A good insurance broker can really help with that.
You made a great point about market value versus replacement cost. That is so important and many people do not realize there is a difference.
I really like your blog!