What to Look For When Buying Homeowners Insurance

Are you overwhelmed by the amount of homeowners insurance coverage options on the market today? This is what to look for when choosing your insurance plan.

You put a lot of time and money into creating the home you want. Yet, the risk of some kind of accident or weather damaging your home looms large. It’s not an idle concern, as around 1 out of every 20 homeowners file a claim each year.

Yet, when you look at homeowners insurance, the vast array of coverage options can leave you overwhelmed. Do you really all of those extra options? Is the less expensive policy going to end up being a disaster for you if something does go wrong?

If questions like these haunt you, keep reading for our guide to what to look for when buying homeowner’s insurance.

Boost Your Liability Coverage

All homeowners insurance policies come with some level of liability, but it tops out around $100,000 in most policies. The problem is that the laws governing what someone can sue you for vary from state to state. In some states, all of your assets can end up at risk.

It’s not a problem if you’re total assets are less than $100,000, but if you’ll want more liability coverage if your net worth exceeds that number.

Replacement Cost Coverage

In the event that your home takes catastrophic damage that destroys everything inside, your standard policy includes a clause about replacement costs that specify the actual value of the possessions you lost. The actual value and what it takes to replace them can vary wildly. Instead, get the replacement cost coverage option.

It’s an easy way of protecting yourself and managing finances with your coverage plan after a disaster.

Replacement Value

When you set up your coverage policy for the structure itself, don’t get replacement value coverage based around the market value. That value folds in the value of any land the house sits on, not just the house itself. If you’re thinking of making a serious change to your insurance coverage, get a new assessment done on your house.

Take that number to your insurance provider and discuss how much coverage makes sense.

Area-Specific Disaster Coverage

One common way that insurance companies keep costs down is by excluding natural disaster coverage, such as hurricanes, earthquakes, or tornadoes. If you live in a place where a particular kind of natural disaster occurs, you’ll want a personal insurance policy add-on that gives you specific coverage for that kind of disaster.

These days, it’s advisable for most homeowners to include flood insurance on their policy.

Picking Your Coverage Options

When it comes to picking your coverage options, always start with the essentials: liability, house replacement, possession replacement, and disaster. These ensure that you’ll get your home and possessions back, protect yourself from lawsuits, and protect yourself from natural disasters.

If you run a business out of your home, which is increasingly common, you’ll likely need a policy endorsement for your homeowners’ policy. You may even need small business insurance as well if you see clients at home.

Looking for more tips on improving or protecting your home. Check out the posts in our Real Estate & Home section.