Homeowners insurance policies can help you get your home back to normal after a fire, vandalism or another disaster that damages the property. They also cover personal belongings if they’re stolen or damaged, as well as medical bills and court costs if someone is injured on your property.
What You Need to Know
Home owners should consider several factors before making a decision on the right homeowners policy for them. These include the insurance company’s reputation for handling claims, their financial strength and their customer service ratings.
Companies’ retention rates – what percentage of policyholders renew each year – can give you a good idea of how satisfied customers are with a company’s service. Check with your agent or the insurer’s website for information about these ratings.
Replacement cost – the amount it would take to rebuild your home with similar materials, not accounting for depreciation and inflation – is a critical factor in calculating your insurance premium. Insurers will consider the size of your home, its number of bedrooms and bathrooms, age and style, and local construction costs in determining replacement cost.
What’s covered – the extent to which your home and its contents are protected in the event of a loss – is also important to understand before buying a policy. Typically, the maximum coverage limit for your dwelling and its contents is 70 percent of the insured value. This is the bare minimum recommended by many experts, but it’s worth reviewing with your insurer to make sure you have enough coverage to replace all of your items in the event of a loss.
Additional living expenses – if your house is damaged so severely that it’s uninhabitable, coverage for loss of use can pay for hotel stays, restaurant meals and other expenses while you try to find a new place to live. This is a common feature in most homeowners policies, so be sure to discuss this with your insurance agent.
How to Save on Your Policy
When you’re searching for a new policy, it’s a good idea to shop around. You’ll want to look for a company that offers low rates and a wide range of discounts. Some of the most popular are for people who have recently bought a new home, belong to a group savings program or do not file a claim in a certain period of time.
A high credit score can also impact your premiums. It shows that you’re a responsible homeowner, and that you’ll be able to pay for repairs and other losses if a disaster strikes.
Your policy’s deductible – the amount you have to pay before your policy covers the loss – is also important. If you have a large deductible, you’ll be able to lower your premium and save money on your monthly bills.
If you cancel your policy, you’ll receive a refund of the unused premiums in escrow, which can be used to offset any costs you may incur as a result of the cancellation. This is a good way to protect your bank account, especially if you plan on moving within a few months.