Hints For Buying Homeowner's Insurance

Robin Wells

Insurance companies are in business to make a profit, but they can't put their financial interests above yours—you pay premiums so you're covered when you need it. If you're a homeowner, insurance coverage can be a valuable asset, but there are things you need to know for you to be at an advantage.

Buying Adequate Coverage

When it comes to buying enough homeowner's insurance, your home's market value isn't what counts. You need to know how much it will cost to rebuild your home if it burns to the ground or some other covered peril strikes.

Don't use the purchase price or appraised value of your home as a benchmark to determine how much insurance coverage to buy. Instead, calculate what it would cost to rebuild your home. Keep in mind that construction costs vary by area. You should also allow for rising costs for building materials in the future. Most insurers allow you to make changes to your coverage at any time so that your home and personal possessions are protected.

Likewise, don't underestimate the value of your personal property. If you suffer a major loss, it's a huge expense to replace all of your belongings. Personal possessions are usually covered for up to a certain percentage of the amount you have your home insured for. But if your policy coverage is for actual cash value rather than replacement value, you won't have enough insurance money to replace your losses at current prices. Even if you have a replacement value policy, limits may apply on certain items. That's why you need to be clear on the terms of your policy.

Saving Insurance Dollars

Shop around to see what discounts various insurance companies offer. The wider the variety of discounts a company offers, the more likely you will qualify for discounts that meet your particular needs. Switch from one of a company's major competitors and you may save even more.

Bundling your policies with a single company is another way you can save money on insurance. Large companies that offer several types of insurance products give cheaper rates to customers who buy multiple policies. Combining policies saves you and the insurance company both. The company gets more of your money and can reduce its risk by gaining access to more of your claim history.

Keeping Your Home Covered

Continue to carry a homeowner's policy even after you pay off your mortgage. If your homeowner's insurance was paid from an escrow account with the lender when you had a mortgage payment, let your insurer know to start sending you the bills.

Although you no longer have a mortgage lender that requires you to carry homeowner's insurance, you are still taking a big risk if you drop your coverage. Besides protecting you against property losses, homeowner's insurance provides you with personal liability coverage if someone gets injured on your property. A paid-off mortgage won't compensate for being sued in court.

For help finding the coverage right for your home, talk with an insurance company like Arkansas First Choice Insurance.