When shopping around for insurance, many companies allow you to pick and choose your coverage limits, deductible, and optional coverages. Policyholders can select several parameters and see how these coverage options affect the cost of the policy. But some of these home insurance decisions should be evaluated by a professional.
When it comes to insurance that protects your biggest investment, it’s a good idea to rely on independent professional advice instead of doing it yourself. That doesn’t mean there’s no need for your own research, but there are steps in the process that really need a second look. Here are five home insurance decisions you shouldn’t make without careful research or input from a professional.
Determining the amount of Coverage you Need
Dwelling coverage is the portion of your home insurance policy that protects your home from disasters such as fire, wind, and hail. The amount of coverage you buy plays a big role in determining how much you’ll pay for protection.
Most people would be tempted to set their dwelling coverage low to keep their premium costs low. This is a terrible idea. While this does save in premium costs, it also means that if you need to make a claim, you might not have enough in coverage to pay for all your stuff. So take that into consideration if you don’t have sufficient savings to make up the difference.
So how much coverage should you purchase? Enough to completely rebuild your home should it be burned to the ground. It won’t be the same amount you paid for the home of course, but it will be enough to start over. To figure how much coverage you should purchase, multiply the square footage of your home by the local building costs in your area. If you aren’t sure what it would cost to rebuild, contact your local home builder’s association or ask an insurance professional.
Deciding on your Deductible
Your deductible is the amount you pay toward a covered claim. Many “experts” will advise you to set your deductible high because it will decrease your annual premium. That is true, but what happens if your deductible is so high and you can’t pay it? You won’t be covered if there aren’t enough funds to cover the entire loss.
Take into consideration the amount of money you have or can set aside in savings to make up the high deductible difference. If you’re unsure, ask your agent for help.
Protecting your Possessions
Most home insurance policies include coverage for your possessions. Normally your coverage limit is set between 50 and 70 percent of your dwelling coverage limit. Except certain high-value items like jewelry, furs, and even collectibles can have a limit on payouts. This means your most valuable possessions may not be fully covered if they’re stolen or destroyed by a natural disaster. So, adding a rider to your policy that covers specific high-dollar items might provide the best coverage.
Also, consider additional coverages such as flood insurance. Most people skip out on flood insurance because they don’t live in a “flood zone”, but this can be a costly mistake. Flood insurance is inexpensive in non-flood zones. Sadly, after most hurricanes or major flood catastrophe, historically about 70% of those who had damage, didn’t have flood coverage because they live outside of the “flood zones”.
Establishing Liability Limits
Standard home insurance policies also have two types of liability coverage that can help you if someone gets injured on your property.
First, personal liability protection can assist if an injured person sues you. It can help pay for your legal defense, but only up to your coverage limits. That limit is typically set at about $100,000, but if your case exceeds this limit you’re responsible for the balance. paying up.
And second, medical payments coverage can assist if the injured person doesn’t end up suing you. The coverage limit is typically set at $1,000 and again, you would be held responsible for any expenses that exceed that amount.
Most people don’t realize that these limits exist or even know that you can extend them for a relatively small additional amount.
Dropping Coverage when you pay off your Mortgage
There’s no law that requires you to have home insurance; but, your mortgage lender will require that you carry a policy to protect the bank’s investment.
So what happens when your mortgage is paid off? You could drop your policy, but without adequate home insurance, you would have to pay the full cost of any damage to your property should an incident occur. So instead of dropping coverage, consider lowering the policy amount and/or increasing the deductible to minimize premiums.
DIY projects are great for updating an old dresser, but when it comes to protecting your most valuable asset, you should do your research and take advantage of the expert advice an independent insurance agent can provide.