Home Insurance: Protecting Your Biggest Asset

Home insurance is a must if you own your home, but what do you need to know prior to purchasing insurance?  Some of the most important factors are as follows:  replacement value of your home, your "risk" rating, whether or not you are located in a flood plain and types of discounts you may be eligible for.

Your home should be insured for the amount of replacement value, but how do you know what that amount is?  A builder should be able to assist you.  For a small fee, they can go through the house and provide an estimate.  Make sure the builder takes into consideration any special moldings, plaster wall treatments, stone work for fireplaces, etc when he is making the final estimate.  Otherwise, the costs will be figured using a modern, low cost alternative.

Your insurance premium is based on "risk factors" that include such things as your occupation, cost to build in the area, where your house is located, what you own, and how you live.  Do you have a family dog?  What breed is it?  Does your house have a pool?  Do you have a trampoline or hot tub?  Is your house located in a storm zone or a high crime area?  Certain materials can reduce your premium such as stone or brick in high storm areas, but the cost of these materials directly affect your premium since your insurance will be used to rebuild your house in the event of a claim.  These factors are all considered when determining your premium. 

Your basic home insurance policy doesn't necessarily cover all claim situations.  For instance, if you live in a flood plain, you will need an additional policy to cover floods because most home insurance policies do not cover flooding.  Another example would be additional policies required for earthquakes in California or hurricanes in Florida (although most policies in Florida contain a separate rider for hurricanes at a higher deductible).

Many home insurance policies offer discounts toward the premiums for various home upgrades.  For example, in areas that are prone to windstorms, discounts are offered for storm shutters, reinforcing your roof, or other improvements to your home to help withstand storm damage.  Discounts are also offered for burglar alarms, smoke detectors, and installing dead-bolts.   Larger discounts are offered for monitored sprinkler systems, fire alarms, and burglar systems.  Some states even offer discounts for citizens over the age of 55 and for policy holders that have remained loyal for at least 6 years.  Be careful though because the amount of the discount may not be enough to offset a better price from a different company.

Make sure when the time comes to purchase a new house that you consider the cost of the home insurance.  Shop around and compare prices.  Also, check out the company that you are going to use.  Determine the time that the company takes to pay claims and the overall stability of the company.  No bargain price is a bargain if the company isn't stable enough to pay your claims.  Do your homework and you can get very affordable home insurance.