October 21, 2020
Homeowners insurance is designed to bring your home and possessions back to the same condition they were in before a loss occurred. The amount of coverage you elect directly impacts the cost of the premium. Standard home insurance typically includes four primary parts:
Dwelling Coverage: Covers the building itself. If a disaster happens you want to have enough insurance to cover the cost of rebuilding your home from the foundation up. Consider this, about two-thirds of American homes are underinsured by more than 20 percent.
Other Structures Coverage: This covers detached outbuildings or structures such as fences, garages, pools, boathouses, sheds, etc.
Loss of Use Coverage: Loss of Use, also known as Additional Living Expenses, is a coverage designed to pay for expenses that arise due to your home being uninhabitable after a covered loss. Expenses that may be covered can range from alternate living expenses, hotel bills, gas, groceries, storage, moving, etc. If you are a landlord and your property suffers a total loss, loss of use coverage may allow you to recover lost rent while your home is being repaired or rebuilt.
The standard homeowner’s policy has loss-of-use coverage worth 20% to 30% of the home value. If you live in an area where rents are high, you may need more. Conversely, if you have a second home or nearby relatives, you can opt for less.
Personal Property Coverage: This covers items inside your home. There is a handy little app created by the National Association of Insurance Commissioner called MyHome Scr.APP.book 4+ that can help you itemize and estimate your belongings.
Now that you understand the components, let’s review best practices to keep premium values at bay.
Annually Review Limits and Possessions
Meeting with your agent, at least once a year, is the best way to protect your most valuable asset. Pull out your declarations page which outlines your summary of coverages, as well as your exclusions listings. Then set up a meeting to discuss both with your agent. Your agent should know the right questions to ask you to explore areas you may be under or over-insured.
Ask About Discounts
While you are speaking with your agent, make sure you are taking advantage of all the discounts you might qualify for. New construction homeowners win big in this area, but so do those who bundle home and auto coverages together. And if you have honor roll students or retirees in your household, there’s another discount you may be eligible for.
Improve Home Security
Discounts are given for basic deadbolts, smoke and carbon monoxide detectors, and burglar alarms. Some insurers will offer higher discounts if you install sophisticated sprinkler and/or home security systems. But these purchases can be expensive and not every system qualifies. Be sure to check insurer recommendations and compare installation costs against premium savings.
Increase Your Deductible
Increasing your deductible by $500 or $1,000 can save serious premium dollars, up to 25% according to the Insurance Information Institute. With most homeowners’ premiums coming in around $1,200, that translates to $300 in savings. Most people are not going to file a claim for $1,000 worth of losses and risk of a premium hike in the following year. Consider what repairs cost and what you are willing to pay out of pocket.
Finally, don’t be tempted to just insure your home dollar for dollar against your mortgage value.
For most of us, our home is the most valuable thing we own, full of prized possessions. Be sure to sufficiently insure it to cover the cost of rebuilding your home from scratch if it burns down, is blown off away by a tornado, or some other disaster strikes.
Curious about your coverage? Call one of our Avery Personal Lines Agents today!