Ten Things You Need to Know About Homeowner's Insurance

1. Not all insurance policies are the same. Different people have different needs and there are many variations in the products offered by insurance companies. A basic rule to follow in evaluating your needs is to look at your insurance coverage in four key areas: insuring the physical structure, insuring the contents, insuring against your liability to others, and insuring that you will have enough to cover your living expenses in the event you are forced out.



2. Purchase replacement value insurance instead of cash value insurance. In the unfortunate event you suffer a casualty you will want to "replace" your home and valuables with similar, new items. Cash or fair market value policies usually will not provide sufficient coverage to do this. Insure only the value of the physical structure, not the land.



3. Your "loss of use" coverage should be sufficient to carry you for two years. Hotel bills, restaurant meals, rent and related expenses add up quickly. In the event you are forced out of your home while it is repaired or rebuilt your loss of use coverage should be enough to provide for these expenses for at least two years.



4. Accurately inventory your personal property. Having an accurate inventory that is properly valued serves two purposes: it helps you initially determine the amount of insurance you need to purchase, and in the event you need to file a claim will aid in helping you recall, and prove, what you owned and its worth.



5. Purchase riders or endorsements for your valuables. Most homeowner's policies have limits on how much they will pay for certain expensive items such as jewelry or antiques. If you want to be sure such valuables are covered for their full replacement value you will need to specifically list them and, in most cases, have a rider or endorsement to your policy for each such item. This usually means you will pay a little more.



6. Routinely perform a homeowner's insurance check-up. It is a good idea to review your policy every year. Read your policies provisions, limits, and exclusions; regularly appraise your property to be sure costly coverage gaps haven't developed as a result of inflation. While it may have cost $200,000 to replace your home five years ago it could easily cost $250,000 today.



7. Choice of payment plans, deductibles, and discounts. Look for carriers that give you choice and flexibility in payment plans. Having the option of selecting a higher deductible may allow you to lower your insurance premiums. Discounts are usually available for certain items like smoke detectors and security systems; be sure to ask for a list of items your carrier will give a discount for. Most companies will also give you a discount if you have multiple policies (auto, home, life and others).



8. Be familiar with the claims process. It should come as no surprise that different companies perform differently when it comes time to pay on a claim. Have your insurance agent explain the process to you. Will you receive your entire claim upfront, or only some portion of it? Ask if the company you are considering surveys its customers to find out their level of satisfaction.



9. Not everything is covered. You need to read the declaration page of your policy to understand what is covered and what isn't. Certain things like neglect, wear and tear and pet damage are rarely covered.



10. Consider an umbrella policy; flood and earthquake insurance. Most policies have limits of around $300,000 for liability insurance - which covers you in the event someone is hurt on your property. If you have assets, consider purchasing an umbrella policy which would add extra liability protection to your home and automobile policies. If your home is located in flood or earthquake prone areas it is important to know most policies do not cover these types of disasters. If your home is in a declared "flood zone" you can obtain flood insurance through the National Flood Insurance Program (NFIP) a division of the Federal Emergency Management Agency (FEMA). In California, you can get earthquake insurance through the California Earthquake Authority.