Homeowners insurance is a necessity of life for anyone who owns a home. However, when you are pricing insurance policies, you’ll quickly realize that there can be a huge variance between the different policies’ coverage options. Those differences can greatly affect the price you pay for your coverage as well as the protection you and your family enjoy with your policy.
Before you choose a policy, there are a few key components that you should understand. Although there is no magic number that you should aim for when estimating your required coverage amount, understanding the components that make up your insurance policy will help you make an accurate estimation of your own needs.
Homeowner’s insurance coverage typically consists of four different areas of coverage: dwelling, other structure, personal property, and loss of use.
The dwelling portion of your homeowner’s policy insures your house. This is the coverage that will pay for damage to your house in the case of damage caused by storms or fire. Keeping an eye on the cosset of construction in your area will guide you in determining the amount of coverage you need here. You should make sure that your policy would allow you to build a comparable house in your neighborhood in the event of a total loss.
The other structures portion of your homeowner’s policy protects other improvements you’ve made outside of your home. Typically this includes sheds, detached garages, and sidewalks.
Personal property is one of the other key facets of your homeowner’s coverage. This can be the one that makes it a little tricky to determine your amount of required coverage. First, you should know if your policy covers replacement of lost or damaged property at the property’s replacement value or fair market value. This difference can make a big difference in your premium, but can also greatly reduce the benefit of your policy. Second, you should take care to evaluate the value of your belongings, once a year or so. If you’ve recently purchased several big ticket items you ay find that you need to raise your coverage amount.
If your home becomes uninhabitable while repairs are being made, you’ll be glad to have the loss of use portion of your homeowner’s coverage. This coverage will pay for your living expenses while you are out of your home.
Finally, if you are concerned about some other type of coverage that is unique to your situation, you should discuss those concerns with your insurance agent. Special endorsements can be added to your policy to guard against the effects of inflation, guarantee replacement of your house, and specify the coverage of certain pieces of property.
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