Home Insurance Basics

One of the largest investments you will make in your life is buying a home. To protect your investment, you need a homeowners insurance policy. More importantly, you need to know how to choose one that meets your particular needs. You can get homeowner's insurance to cover a multitude of situations.

A) The standard policy will usually cover things like fire, smoke, frozen pipes, ice, snow and theft. It also provides coverage for liability claims and legal or medical costs if you find yourself in a lawsuit. For example, if your dog bites the mailman, or your kids friend falls from a tree on your property and breaks his leg, your insurance will cover the medical expenses. The most common liability coverage is $100,000 but it is important to consider whether that amount is sufficient for you. Home insurance offers a variety of deductibles averaging from $500 to $2000, so shop around and decide on what is best for you.

B) Things that are not covered in a standard policy are flood, earthquake and damage caused by an act of war, such as a nuclear accident or terrorism. If you find yourself needing any coverage for these types of things, most companies offer special endorsements, but they cost extra. An endorsement is not an additional policy, but an addendum to the one you already have. If you want coverage for things like jewelry, art and antiques, sports equipment or collections, you will need to request a Personal Property Endorsement. It is a good idea to have these items appraised beforehand. Remember to tell your agent about special security features your home has. This may get you a discount on your premium. Dead-bolt locks, security systems, storm shutters or fire-retardant roofing may lower your premium too.

C) Purchase enough coverage to replace what you are insuring. Replacement Coverage gives you the money to rebuild your house based on the value at the time of the loss. You can also get Extended Replacement Coverage which will pay the cost of the dwelling and/or appurtenant structures if the property is damaged beyond repair. The alternative to Replacement Coverage is a Cash Value Policy which is cheaper, but pays only what your property is worth at the time of the loss, less depreciation for normal wear and tear.