Choosing the right homeowners’ insurance

Shopping for homeowners’ insurance is one of the least glamorous parts of the home buying process, but you’ll be glad you have it when the unexpected happens—a burglary, fire, flood, or when someone gets injured on your property.

Whether you’re in the process of finding homeowners’ insurance because you’re buying a new home, or you have an existing policy that deserves a second look, homeowners’ insurance policies can be difficult to navigate, between tricky language, vague coverage details, and long lists of exclusions.

When you’re ready to start looking for insurance, have this information handy:

• Your social security number
• The age and location of the home
• The home’s proximity to fire hydrants and fire stations
• The age and condition of plumbing and electrical systems
• Policy numbers for any other policies you have with the same insurance company (auto or life insurance, for example)

Then, ask your insurance agent the following questions:

What type of coverage do you offer?

Be aware of differences in coverage. Basic coverage will cover the rebuilding of your home and its contents up to your policy limit. Replacement cost coverage (also called cash value coverage) pays to rebuild your home and replace your belongings, even if costs exceed your policy limit. For example, if your losses include a five-year-old television, a basic plan will only pay you for what the television is worth now, due to depreciation. Replacement cost coverage ensures that you will be able to buy a new television at today’s cost.

Is loss of use coverage included?

If disaster strikes your home and you have to completely rebuild, you’ll need somewhere to live until your home is habitable again. Does your policy include lodging, travel, and food coverage?

I live in a part of the country where earthquakes/floods/tornadoes/termites are a problem. Does my homeowners’ insurance provide coverage?

Most basic insurance policies do not cover earthquakes, floods, or pest damage. You may need a separate rider for natural disaster coverage. If the insurance company won’t provide it, contact your state or federal government. Some government offices underwrite natural disaster coverage.

I have expensive valuables. Are they covered?

A standard policy should cover your belongings. However, if you own antiques, artwork, or expensive jewelry, you might want a separate rider for these pieces. A standard policy may limit the per-item replacement to $2,000-$3,000, so if you need additional coverage, provide your insurance company with appraisals for your most valuable belongings.

Is your company financially solvent?

Only insure your home with a company that has a long history of financial stability. Insurance companies’ financial statements are released quarterly and can be found online. Don’t insure your home with a company that may not be around to pay your claims in the future.

HOAs in neighborhoods with single-family homes may cover sidewalks, landscaping, and common areas. Ask to see a comprehensive list of what is included.

What discounts are available to me?

Just like with car insurance, there are myriad discounts available for your homeowners’ insurance policy, including:

• Multiple policy discounts. You’ll receive discounts of up to 5% when you insure your home with a company that already provides your auto, renters’, or life insurance.
• Installing security systems. Save 5-10% when you install a security system in your home. The amount you save may almost completely cover the cost of your monthly alarm monitoring service.
• Age of your home, and specifically its roof, plumbing, and electrical. Newer systems mean savings.
• Change in deductible. Most companies require a minimum $500 deductible. If you’re comfortable with a higher deductible, you can save 25% on your policy.

Once you’ve insured your home with a policy that fits your needs with a company you trust, revisit your policy documents every year and make sure that your coverage is still sufficient. Always revisit your policy when you’ve made renovations to your home, purchased expensive valuables, or when your financial situation has changed. The right homeowners’ insurance policy will provide peace of mind that you’ve protected one of life’s biggest investments.