Your home insurance coverage may not be what you see first, but it is the most important. Whether you are buying your first home, refinancing your current home or are looking for your next home you probably want the best rate. Well, of course you do! However, while the best rate is important we feel like the best coverage is most important.
Your Home Insurance Coverage and Claims
You do not want to get into a claim situation where you don’t have enough coverage or don’t have coverage at all. It is easy to get caught up in the numbers, but I want to look at home insurance in a different light today. So I will highlight some key areas that you don’t want to skimp on in the insurance buying process for your home.
When you get your quote or policy renewal do not just glance at it and file it away. Take a moment and really look at your coverages. There will be a lot on there, but I want to point out a few that you really need to look at and understand.
Replacement cost or Coverage A on your policy.
This is the coverage for your home. Replacement cost is figured by each company based on what their system calculates that it would cost to replace your home as it is if it burned to the ground. This number will often be higher than the appraised value or your purchase price.
Note: You can also get coverage on an actual cash value basis. The actual cash value is the replacement cost minus depreciation.
Liability coverage is what covers you if someone gets hurt on your property. The amount you have is the max amount a company will pay. We recommend a minimum of $300,000. Keep in mind that we live in a litigious world and people sue much more often than they once did.
Also remember that when the liability coverage is maxed out then you will be responsible for any remaining balance.
Note: Umbrella insurance is an additional policy that we recommend if you own your home. It gives you at minimum of $1,000,000 in additional liability coverage for a very minimal cost to you.
This is all of your personal items. It is usually a percent of the Coverage A amount. However, it can be adjusted to fit your needs. Keeping track of what you have in your home is as simple as taking a video of your items. Then store that video in a safe place. Having a list or video is so helpful if you ever do have a total loss. You will have plenty to worry about during that time so having a ready list of what you own will take one worry off your plate.
Note: Valuable items such as jewelry, guns and art will need to be scheduled and may need to have an appraisal depending on their value.
Each company also will have optional coverages that you will want to consider. Talk through all the options with your agent and decide what coverage you and your family need. The better your home insurance coverage, the less you will have to pay out of your own pocket if disaster strikes. We truly hope you don’t ever have a claim, but if you do we want you to be covered.