Insurance tips for Home Owners

Insurance requires you to think about bad occurrences … medical problems, car accidents, emergency home repairs. But although it may sound pessimistic to dwell on what could happen (carpe diem, anyone?), it’s important to protect yourself from some of life’s biggest surprises.

1. What It Covers

A typical policy will pay for damage to your property and your possessions in the event of certain storms, fire, theft or vandalism. Like renter’s insurance, it also provides liability coverage if someone gets hurt on your property and decides to sue. Homeowner’s insurance also covers shelter costs, so you don’t have to face crazy hotel bills if you’re temporarily displaced from your house.

Homeowner’s insurance can protect belongings outside the home, too. If something is stolen from your car, auto insurance won’t cover it—but your homeowners policy likely will. “Most policies will cover your belongings when they are traveling with you,” Derrick says. “If you have a $1,200 laptop and it gets lost by the airline, call your insurance agent—right after you file the claim with the airline, of course.”

2. What It Doesn’t Cover

A standard policy has exclusions, including earth movements (landslides, earthquakes, sinkholes), power failure, war, nuclear hazard, government action, faulty zoning, bad repair or workmanship, defective maintenance and flooding. Windstorms are typically covered, including tornadoes, although insurance companies exclude tornadoes or hurricanes in some high-risk areas.

Water damage is tricky. As a rule of thumb, water from above (rainwater or a burst pipe in an upstairs apartment) is usually covered, but water from below (backed-up sewers or ground flooding) generally isn’t. If your region is prone to floods and earthquakes, you should consider supplemental coverage.

3. Why You Should Shop Around

Before committing to a policy, take the time to research an agent whom you trust—preferably one with good reviews online or via a personal recommendation. It’s certainly something that Ramzy Ayyad, who struggled to receive benefits following a house fire in November 2008, recommends that prospective homeowners do. “I had to deal with a rude adjuster,” he says. After complaining assertively to the adjuster’s boss, Ayyad finally received a check for the damages—but the process was exhausting.

By contrast, Terri Corcoran has nothing but glowing reviews for her adjuster. After a snowstorm caused a major leak in Corcoran’s laundry room, an insurance agent came to her home to assess the damage—and promptly determined that the entire room needed to be redone. “They wrote me a check on the spot for what it should cost,” Corcoran says. “I was really impressed by how the company responded!”

Bottom line? Don’t just shop for a policy. Make sure you also select the best agent.

4. Which Preventive Actions Can Reduce Premiums

It may sound like common sense to have a working smoke detector, but did you know that it might also help you land a lower insurance quote? The same goes for a burglar alarm. According to insuranceagents.com, you can reduce your premium by about 5% if you install something as a simple as a deadbolt, and up 15-20% for a burglar alarm system.

Insurance companies price your premium based on how much risk they foresee, so you can reduce the premium by reducing your liability risk, thanks to some smart preventive measures. For example, if you have a pool, you may be able to reduce the likelihood of a claim—and thus, possibly lower your premium—by installing a fence and a pool cover to minimize the risk of a neighborhood kid wandering onto your property and falling in.

5. How Replacement Coverage Differs From Market Value

There are two key distinctions that every homeowner should know: “replacement cost” versus “market value.” Replacement cost covers repairing or replacing your entire home. Market value is how much someone would pay to buy your home and accompanying land in its current downtrodden condition.

When you’re considering the type of coverage to take out, a policy that’s based on market value is typically less expensive but, as State Farm puts it, “for a cash-strapped homeowner, buying a policy based on market value offers the best chance to recoup at least partial expenses after a loss.” In other words, you won’t recoup as much in the event of a serious disaster.

For those who have a good emergency fund in place, Derrick says that there is a way to possibly get more substantial coverage and still pay lower premiums: “You might consider getting a policy that covers more in terms of replacing or rebuilding your property, but with a higher deductible.”

6. Why You Shouldn’t Wait to File a Claim

When buying a policy, make sure to ask about time limits to report a claim, and then abide by them! If you wait too long, you may not be eligible for benefits—especially if waiting has made the problem worse. David Baxter works for a residential and commercial restoration company in Florida, and he remembers a customer with water damage who waited almost a month to do anything about it. “When the mold set in, and he decided to call, his insurance didn’t cover him because it was outside of the 14-day window required for reporting the problem,” Baxter says.

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