Home Insurance Buyer's Guide

You’ve heard them all:

• “Your home is your biggest investment.”
• “Owning your own home is the only way to truly become wealthy.”
• “Home is where the heart is.”

If what so many people tell us is true about our home, properly insuring it should be a top priority:  A home can be a huge financial downfall if not insured properly.  Yet, most homeowners know very little about home insurance beyond the fact that their bank requires it.

If becoming a homeowner is the American dream, then protecting your home is part of that dream. Following is a description of some of the common elements of home insurance and what to look for when you buy.

HOW ARE RATES CALCULATED?
Your homeowner insurance premium is derived from a number of factors. Some of these factors include:

1. Where you live – Some areas are more prone to certain types of claims. For example, some parts of a town may have historically higher crime rates, such as developments with newer homes. Also, homes closer to the coast are more prone to flood and wind damage.

2. Age, size and construction type – New homes may be built with stronger materials to comply with newer building codes. Also, larger homes cost more to replace and are generally more costly to insure.

3. Replacement value of your home – Many home insurance policies, particularly for newer homes, are designed to pay the cost to replace your home if damaged. Remember, this is not necessarily what you paid for your home and it does not include the value of the land on which your home is built.

4. Value of your personal property – In addition to insuring the physical structure of your home, home insurance pays for damage to property inside the home, including electronics, furniture, clothing and other valuables.  Make sure to inventory your belongings – in the event of a catastrophe you’ll need to be able to recall what was lost.  Videotaping your home once a year can play a crucial role for you and the insurance adjustor.

5. Personal liability – Your property is not all that is covered by home insurance. Most policies also cover you and your family, including most pets - for bodily injury to other individuals or property damage which you cause and are legally responsible for, including lawsuits that may arise from these claims.

WHAT TO LOOK FOR
While there are many companies looking for your business, selecting one you trust may be the most important factor - even if it means paying a little more. Apply these tips to find the best insurance company for your situation:

Find a company that fits your comfort zone. Ask: Is the company as accessible as you prefer? Does it communicate the way you prefer (e.g. phone, e-mail, etc.)? Does the company have a local office and do its agents/representatives live in your community? If these factors are important to you make sure you ask these questions before buying the policy.

Financial stability. Recent storm damage in the Gulf Coast region is a great example of the high amount of money insurance companies may have to pay for claims. Check the financial rating of the insurance company you are considering by using a rating service such as www.ambest.com or calling your state’s insurance department. Insuring your home with a company that is not financially stable may be a bad investment, even if it is cheaper.

• Claims Service.  If you have an incident, the company’s responsiveness to your needs will be vital.  Ask if the company adjusts claims or if they contract with other companies who will perform this action on their behalf.

Ask about other products the company sells. One of the best ways to save money and manage your essential coverages is to keep all of your insurance needs with a single company. Ask the company if they sell auto insurance, life insurance or other types of insurance you need. You may be able to get the coverage through the same company and thereby save money in the process.

HOW CAN I GET BETTER RATES?
While shopping for home insurance should never be as tedious as shopping for a home, you will want to set aside adequate time to consider several options. After all you’ve invested a fortune in this place; you might as well save a few bucks on the insurance.

Shop around. Get as many quotes as possible. Compare the quotes “apples to apples,” meaning that all companies and coverage options are on a level playing field. Start by asking friends and family to recommend an agent or company. You may also want to consult with your auto insurance company and see if they offer a multiple-policy discount for insuring both your home and your car.

Use adequate values. Many homeowners mistakenly over insure their homes for property that is not covered, such as the land on which the home is built. But the reverse is also true. Keep in mind factors that will increase the replacement value of your home, such as additions or remodeling work. Such actions affect the value of your home, and if they are not considered, could lead to a costly penalty for being underinsured.

Ask about discounts for upgrades. Installing storm shutters, an alarm system or a new roof are all steps you can take to protect your home from a loss. Taking proactive steps to prevent a loss bodes well with insurance companies and they may offer a discount.

Congratulations on buying your home and living the American dream. Insuring it properly will keep your dream from becoming a nightmare.

To see if you can lower your homeowner insurance premium, get your free quotes today.