8 Things to Do to Find the Best Homeowners Insurance

1. Learn Insurance Terms

Before you even look for an insurance policy that meets your needs, you need to understand the general terms insurance agents will use. Here are xx terms you should know.

• Premium – This is the price you pay for your insurance. The premium can be monthly, every six months, or yearly. When you compare insurance costs, be sure that you are comparing premiums that cover the same length of time.
• Deductible – This is the amount you have to pay on your own when there is a claim. After you’ve paid the deductible, the insurance will kick in to pay the rest. If you agree to a high deductible, your annual premium will be much lower. However, if you choose to have a high deductible, make sure you have at least that much money in a savings account in case a disaster strikes.
• Liability Coverage – This is the coverage that covers someone getting hurt on your property. For instance, if someone were to fall down your stairs or trip on your sidewalk, liability coverage would cover any medical or legal bills associated with the accident. Typically, this happens due to negligence on your part. Perhaps your stairs didn’t have a secure railing or your walk was uneven.
• Personal Property – This part of the insurance covers your property inside the home. Also known as content insurance, it covers your clothes, furniture, decorations, kitchen items, electronics, etc.
• Replacement Cost – This insurance covers the cost of completely replacing your home and/or personal property. Typically, it has a maximum value, so be sure that the maximum value will actually cover what you own.
• Actual Cash Value – Instead of the cost of replacing your home and/or contents, actual cash value gives you what the current cash value of your property is at the time of the incident.
• Sub-Limits – All homeowners policies include maximum limits of coverage. Some also contain sub-limits. A typical sub-limit is that a policy will only pay for contents at 50% of a home’s coverage. So, if your home is covered for $300,000, the sub-limit for the contents of your home would be $150,000.
• Riders – These are extra policy items you can include and are sometimes called floaters or endorsements. Each rider costs an additional fee. Some riders include those for jewelry, antiques, artwork, coins, home office equipment, and musical instruments. Having a rider on a specific type of item in your home allows you to use your sub-limit amount of protection on most of your contents, while still insuring something of great value in your home that would go beyond those limits.
• Personal Umbrella Liability Insurance: This gives you more liability coverage than your policy provides by buying a separate policy.

2. Understand Typical Coverage Amounts

You will want to make sure that you get enough coverage, but you also don’t want to get talked into carrying more coverage than you need. Here are some common levels of coverage to understand so you can discuss your needs with your agent.

• HO-2: This is a broad policy that covers 16 specific perils: fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, volcanic eruption, falling objects, weight of ice, snow or sleet, accident discharge or overflow of water or stream, sudden and accident tearing apart, cracking, burning, or bulging, freezing, and sudden and accidental damage from artificially generated electrical current. If something happens to your home that is not on this list, then you are not covered. Most HO-2 policies are replacement cost policies.
• HO-3: This policy is broader than the HO-2 because it covers all perils unless they are specifically excluded. Those excluded from this policy include: earthquakes, ordinance or law, water damage, power failure, neglect, war, nuclear hazard, intentional loss, government action, collapse, theft while under construction, vandalism or malicious mischief if vacant more than 60 days, mold, fungus, or wet rot, wear and tear, deterioration, mechanical breakdown, smog, rust, and corrosion, smoke from agricultural smudging and industrial operations, discharge, dispersal, and seepage of pollutants, settling, shrinking, bulging, or expanding, birds, vermin, rodents, insects, or animals owned by you. On the other hand, your contents are only covered for the named perils listed under the HO-2 coverage.
• HO-5: This policy covers all perils except named exclusions for both the property and the contents. The exclusions are named in the HO-3 above.
• HO-6: This policy is for condos and co-ops. It covers contents, liability, and issues with your unit for the 16 named coverages found in the HO-2 policy. Insurance for the actual structure is typically part of your Homeowners Association dues.
• HO-8: This policy is typically used for older homes. It covers only the 16 named policies found in an HO-2 policy, but instead of replacement cost, they only offer actual cash value.

3. Contact Companies

Now that you understand the basics about insurance, it is time to contact some companies. You should talk with at least three insurance carriers and compare their coverage and price. Be sure that you only speak to agencies that are licensed.

You will also want to check out customer reviews and their rating. You will want to be sure that you get a good company that is responsive during an emergency.

4. Determine How Much Coverage You’ll Need

Your insurance agent should be able to help you with this. You will want to think about how much it would take to replace your home and all your belongings if a catastrophe happened that destroyed your home. To do this, you will need to gather information about your home, such as:

• Square footage of your home
• Number of baths
• Type of roof
• Type of exterior
• Age of house
• Condition of outbuildings
• Whether the house is in a floodplain and will need flood insurance
• Copy of the inspection report
• Copy of the current appraisal
• Detailed inventory of your contents

5. Ask About Savings

Some companies offer discounts if you do things that reduce your chances of sustaining a loss. This could include installing a roof that is impact-resistant, installing an alarm system, installing deadbolt locks, or having fire extinguishers in the kitchen and garage.

Companies will also offer discounts for having an automatic withdrawal for premium payments, going paperless, or having other insurance with them, such as car insurance.

6. Choose Your Deductible

The deductible you choose will make a huge difference on your premiums. The higher the deductible, the lower the premium. This sounds really good when you are making your payments but might not sound so good when you are having to pay out of pocket for damage to your home. Make sure you set your deductibles at a level that you can afford.

7. Read Your Policy Carefully

Before you sign on the dotted line, make sure you read over your policy carefully. Make sure that you understand the policy and know what is and is not covered. If you have any questions, be sure to ask. Once you’ve signed the form, it becomes a legal and binding contract. If a problem arises later because you didn’t understand the contents, it will be too late to do anything about it.

Once you have the contract, be sure to keep it in a safe place. You might want to make a copy of your policy and email it to a close friend of family member for safe keeping.

8. Review Yearly

Once you have an insurance policy, do not rest on your laurels. You will want to review your policy yearly because things can change. This is especially true if you’ve remodeled in any way, thus increasing the replacement cost of your home, or if you’ve recently purchased new contents.