For new homeowners, choosing a homeowner's insurance policy can be confusing. When determining what is a good policy for you, if you have a mortgage, your lender will require insurance to cover the actual structure on the property -- which is what is securing the loan, but your home is much more than the structure. You likely have a good amount of furniture, electronics, jewelry and other items in the home that you'll want to insure. You can review your coverage options and add riders for uncovered items.
You'll also want to decide what you’re comfortable paying as a deductible. While a low deductible and a good price can make a good insurance policy great, price shouldn’t be the only factor when weighing the value of a homeowner's insurance policy.
Obviously, your primary concern when shopping for a good homeowner’s policy is the coverage that is included. Get a thorough understanding of what is included in your coverage. Typically, homeowner’s insurance covers the house itself, as well as structures on the property, such as sheds and pools. Your policy may cover personal belongings and also provide personal liability. This can help cover any financial losses if someone was injured on your property – or if a member of your household causes damage to someone else’s property.
When reviewing policies, you'll need to determine whether to select depreciated value coverage or replacement cost coverage. While the former is typically less expensive, the compensation you receive may not be enough to actually replace your property, as you will be paid a sum based on the purchase price of the item minus depreciation. For instance, an insurer could determine that a sofa that cost $1,000 five years ago is now only worth $300 or $400, and pay you accordingly.
Most homeowner’s insurance policies do not cover business equipment, damage from natural disasters or jewelry replacement. Most policies will also not cover damage from floods, earthquakes or forest fires. Your lender may require a separate policy if you live in an area where these disasters are common.
You can help build a good homeowner’s insurance policy by working with your agent to add riders, mini insurance policies that extend your coverage to specific items or event. For instance, if you have a lot of valuable jewelry, you can add a jewelry rider to your homeowner’s policy. Or, you might need a rider to cover any damages or liability from a wedding reception or other event held at your home. Other riders might include fine art, home office and electronic equipment, expensive furniture and other valuables. If you are purchasing riders to your homeowner's insurance, your insurance company may require an appraisal of the property covered. Also note that some riders will require an additional deductible for coverage of that item.
Finding a Good Policy
It can really pay to shop around for a homeowner's insurance policy. This is the only way you’ll know you’re getting good coverage at a good price. For better coverage at a lower price, consider a higher deductible. It can be helpful to work with a reputable agent who provides coverage from a variety of carriers.
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