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Key takeaways
- Your home is one of your biggest assets; make sure it’s fully insured.
- Homeowners insurance covers 4 things: property, personal belongings, living expenses, and liability.
- How much insurance you need depends on many factors, including whether you want coverage for replacement cost or actual cash value. Global Credit Union Insurance Brokers can help you do a full assessment.
If you’re like most people, your home is the largest purchase you will ever make. And, while it’s highly likely that you already have homeowners insurance, it’s also likely that you’re underinsured. You’re not alone; some experts estimate that 60%1 of U.S. homes are underinsured. Plus, if you’ve remodeled or added on to your property over the years, you’re almost guaranteed to have underestimated how much coverage you need.
To protect the investment you’ve made in your home, take time to understand what homeowners insurance covers, how much coverage you need, and what determines the amount you pay.
What does homeowners insurance cover?
Typical homeowners coverage protects you from damage caused by fire, smoke, theft, hail or wind, damage due to frozen or burst pipes, and other perils. However, most standard policies do not cover damage from floods, landslides, earthquakes, or even sewer backups. You must get an endorsement or separate policy to protect yourself from these risks.
1. Your property
This includes the home itself plus any other buildings on your property, such as a detached garage, sheds, gazebos, or other structures.
2. Personal belongings
This is the contents of your home, including furniture, clothing, housewares, and other items. Most policies cover your belongings even when they’re not actually in your home, such as when you’re traveling.
3. Living expenses
This coverage pays for things like hotel, restaurant, and other expenses if your home is damaged and you must live elsewhere while it is being repaired.
4. Liability protection
Liability coverage protects you if someone is injured on your property, or if you, a family member or even your pet causes damage or injury to someone else.
How much coverage do you need?
When determining how much coverage you need, you must first decide whether you want replacement cost or actual cash value.
- Replacement cost value (RCV) covers the cost to rebuild your home or replace your lost possessions, regardless of their age or condition, with similar, new items.
- Actual cash value (ACV) reimburses you for the depreciated value of your home and damaged or lost items. This amount is based on how much your things were worth at the time of loss, not how much you paid for them or how much it would cost to replace them.
Many policies offer an extended or guaranteed replacement option, which pays an additional amount to rebuild your home, even if it exceeds your policy limit.
Some people think they only need enough insurance to pay off the mortgage, but that’s completely wrong. The cost to rebuild your home is different from your mortgage amount or your purchase price. Insurance also covers what’s inside your home. To help you in case of a disaster, take time to do a complete inventory of your home and its contents once a year. Be sure to list special items such as collectibles, antiques, expensive electronics, and others. Take photos, store this information in a safe place, and then talk with Global Credit Union Insurance Brokers to make sure you have enough coverage.
What affects your rates?
While every insurer has its own criteria, here are some of the most common things that determine your cost for homeowners insurance:
- Size, value, and age of your home, which impacts the cost to repair or replace the structure
- Contents, such as furniture, clothing, antiques, electronics, and others
- Location, which includes proximity to fire protection services, neighborhood burglary rates, local construction costs, etc.
- Security, which is how you protect your home with security systems, smoke alarms, etc.
- Risk factors, which include pets, pools, trampolines, wood-burning stoves, firearms, and others
- Use of your home for a home-based business or as a rental property, etc.
- Your past claims history along with the claims history of the property itself
- Your other policies: you can save by bundling your homeowners with other insurance such as auto
- Coverage levels and deductibles; higher deductibles will lower your annual premiums
When determining your cost of homeowners insurance, the insurance company will consider how many claims you’ve filed in the past, and how many claims have been filed by past owners of your home. If the former owners of your property have filed multiple claims, you could be on the hook to pay a higher rate.
Don’t wait until it’s too late
Don’t just automatically pay your premiums year after year without making sure you’ve got the right coverage. Put your insurance to work for you by taking the time to review your insurance coverage regularly.
Call Global Credit Union Insurance Brokers today to make sure you’re fully protected. They will help you identify the best level of coverage for your needs, at a price that fits your budget.
