First, you need to think about what amount of coverage you feel you need; in some cases, if a mortgage is involved, this will be minimally dictated by the lender. Obviously, the larger the coverage amount, the greater the expense is for that protection. Finding the right fit depends on each homeowner. The better the coverage, the more you’ll get back if disaster does indeed strike.
One of the critical decisions you will need to make is what level of deductible you are comfortable with carrying. You need to be comfortable about covering the deductible if you were to make a claim, as that will be the amount you are personally responsible for paying.
Another decision you will need to make is whether to insure your home and possessions for the actual cash value - or for replacement cost. The actual cash value is the amount it would cost to replace your home or possessions. The replacement cost could be significantly higher than actual cash value down the road.
According to Lynsee James, Capitol Agency® Office Operations Manager, “Everyone knows that they carry some sort of liability on their home (most policies start at $100,000), but it is rarely enough coverage. Your liability insurance would typically provide coverage for things such as sweet, little Timmy hitting a baseball through your neighbor’s window and damaging their crystal collection, your fur baby chomping down on an unsuspecting visitor’s leg, a failed attempt at sushi and your dinner guest becoming hospitalized with food poisoning or even a visitor slipping and falling on your icy sidewalk.”
James also says, “You could be required to pay for legal expenses, medical costs or even a funeral. More common are a loss of wages, pain and suffering, mental anguish and other punitive damages. As you can imagine, something you may think is small can quickly exceed $100,000 limit. If you pay a few dollars more per year, you can increase your liability to $300,000 or even $500,000. This is why it’s important to initiate that conversation with your agent to assess your needs. In most cases, an Umbrella (or excess liability) policy is a good idea in addition to your Homeowners liability coverage to provide adequate protection for your assets.”
Strictly shopping based on price is a common mistake made by customers, according to James. “You want to make sure your policy doesn’t break the bank, but skimping on price can also mean skimping on coverage. Consider price versus value. An independent agent will be able to speak candidly with you regarding all of the companies they represent, which gives you much greater flexibility than a captive agent (think State Farm, Allstate and American Family) would be able to provide.
Once you have a basic idea on these costs, shop around for the right provider. Look for a company with strong financials. Strong financials = ability to pay claims. Ask around - friends, family and neighbors can share their experiences with their providers. What did they like? What did they dislike? Try to speak to people who have similar lifestyles. You will be amazed at what people will talk about when it comes to insurance claims!”
Once you have decided on which company to use, you should ask your agent about all possible discounts. Discounts can include economies of scale by placing all of your insurance with a company, a discount if your home has a relatively new roof, certain types of locks, an alarm systems and more.
Your coverage should address events that could cause damage, like storms or fire. It should also address living expenses in the instance of your home being uninhabitable, property damage, personal liability and medical needs related and natural disaster or accidents.
“A general rule of thumb for reading your insurance policy is this: Your policy comes to you in two parts:
Part 1: The actual policy – this states what your policy covers and what is specifically excluded.
Part 2: Endorsements – these are changes to the policy that alter the language in Part 1. For example, your policy excludes damage caused by earthquakes, but you may purchase an endorsement to add that coverage back to the policy,” says James.
“You might see the words “all peril” on your policy. Unfortunately, this is rarely the case. Some things are excluded from a standard homeowner’s policy, such as flood and earthquake. The other thing to keep in mind is that most policies have limitations on items such as jewelry, furs, fine art, guns, musical instruments and even coin collections. This is another reason it is important to build a relationship with your agent and have conversations about what is important to you.”
Remember, your policy is a critical document, and keep it somewhere safe. You should review your policy each year, as life events can change needs.
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