I'm sure we all can remember the process we went through to buy our first home. It was an exciting time for me, but I bet we can all agree that securing an insurance policy on our new home was not a memorable occasion! Actually, nothing about insurance is exciting. In a perfect world you buy a good policy, pay over time, and never have to use it. To most people this is a big waste of money! Deep down we really know this isn't the case. Insurance is very critical to your family's financial well-being. We all take for granted that if we lost everything, "the insurance company will pay for it". Just imagine the family that doesn't have this luxury. They just lost a $150,000 home and all of their belongings! What a nightmare! All because they let their policy lapse! The reason that I feel strongly about this is because I was an insurance agent for 5 years. I saw how having or not having insurance affected many people. I have compiled a few tips and coverage explanations to look for when looking for your home insurance policy.
Dwelling with Expanded Replacement Cost- If every insurance agent and computer property evaluator was perfect, we wouldn't need this endorsement. However, we know this isn't the case. When writing an insurance policy some agents do better than others in estimating how much to insure your home. You do not want to be held to the amount they come up with. Many times people only look at price and not what their home is actually being covered for. Poor agents will also cut coverage to get the premium to look good and land a sale. This can really put a customer in a world of hurt. Just look at the fires in California. $700,000 homes were burnt to the ground and they were only insured for $500,000. That is a $200,000 burden left up to the customer. With expanded replacement cost, the policy will pay up to 120-125% of your homes value. This gives you an extra cushion in the event your home was under insured! (Keep in mind it only pays out if you need it).
Inflation Protection - Most good policies have this. This adjusts your policy each year for inflation. I am sure you have seen your $150,000 insurance policy jump to $154,500 in its second year. This increase is due to inflation protection. This is needed because it will cost more to re-build your home in the years to come than it will today.
Other Structures - This is coverage for any detached structures. If you don't have any, it will stay at 10% of your dwelling amount. If you have more detached structures to cover than the 10% allowed, you will want to make sure it is increased.
Personal Property Replacement Cost - We all know what this is, but believe it or not there are still policies out there that have limited replacement cost or actual cash value! Stay away from these. Full replacement cost is the only way to go! Also look at the amount you are covered for. Some companies cover 75% of your dwelling amount. Others offer less. Just get the most bang for your buck!
Loss of use - If you are unable to live in your home due to a loss, your policy will pay for the expenses you incur while living elsewhere until your home is repaired. Some policies cap the amount here. Make sure you feel the limit is sufficient. Good policies will state "Actual Loss"
Liability - The minimum amount is $100,000. This is too low. $300,000 is the minimum you should have. You can of course have more. If you have an umbrella policy you can keep your liability at $100,000, but if not make sure it is increased. There are too many sue happy people out there and you want to be protected!
Medical Payments - This is not like your car insurance med-pay. This is only for others on your property. Not many people go with more than $1000. Just make sure your liability is high and you should be fine. Make people file suit if they are on YOUR property and try to collect money off of your policy!
Deductible - Your deductible is up to you. Go with an amount that makes you feel comfortable. $1000 is most popular today and makes the most sense. This reduces your premium and will also help ward off small piddly claims that will raise your rates. What good is a $500 deductible if you claim something that is $700? You save $200 and your rate goes up $20 a month. Then if you would happen to have a 2nd loss, you would have 2 claims and are in danger of non-renewal or a huge rate hike!
Earthquake Endorsement - Some people have this and others don't. Make your own decision,but realize that if your home is damaged due to an earthquake or earth movement, you are out of luck! This isn't too expensive so weigh the pros and cons. Earthquake deductibles are typically 10% or so. This equates to $15,000 on a $150,000 home. This may also factor into your decision.
Water or Sewer Backup Endorsement - This is something many people think is included in a policy and it is not! Water damage is covered, but not sewer! Your can purchase specified amounts of protection. Be sure to look into this and ask your agent.
Identity Theft Endorsement - This is a newer item, but is gaining in popularity. If someone steals your identity and causes you harm, it can cost some time and money to clean things up. This will pay for it and provide a representative to help facilitate the process!
Scheduling Items - The most common item to schedule is jewelry. Your policy has low limits for specific items. You will want to schedule valuable or priceless items. This is a quick summary of the parts of a home insurance policy. Keep all of these points in mind when deciding who you are using and what coverages to include. Just remember you are buying piece of mind and financial security when you pick your coverages. Don't focus solely on price and find an agent that will work hard for you. I hope this helps.
Here are a few links to some of the larger insurance companies.
State Farm Insurance -
http://www.statefarm.com/Liberty Mutual Insurance -
http://www.libertymutual.com/Allstate -
http://www.allstate.com/Shelter Insurance -
http://www.shelterinsurance.com/American Family Insurance-
http://www.amfam.com/Farmers Insurance -
http://www.farmersagent.com/emiller2/Your comments are welcomed!
Brought to you by:
Professional Mortgage Group Inc.
"Your Columbia, MO Mortgage Broker"
