Insurance

These are six basic insurance questions you should ask when either renewing or purchasing a homeowner’s insurance policy:

1.  How much would it cost to rebuild my home to its current state in the event of a total loss?  Ideally, a homeowner’s insurance policy should cover the cost of building a new home from scratch.  In general, homeowner’s policies cover partial or total damages caused by fire, hail, lightning and hurricane or any other disaster if it’s listed in the policy subject to certain deductibles.  Flood and earthquake losses must be insured separately because they both are excluded in standard homeowner’s insurance policies.

2.  How much is my personal property worth in the event of a total loss?  A homeowner’s insurance policy should cover the cost of replacing all personal property (furniture, appliances, clothing, etc.) should it be stolen or destroyed by any covered peril.  Most companies provide personal property coverage equal to 50% of the amount of insurance on the home.  In other words, if your home is insured for $150,000, you would have personal property coverage of $75,000.

3.  How much liability protection do I need?  Liability covers the homeowner against lawsuits for bodily injury or property damage caused to other people, including damage caused by pets.  This portion of the policy pays legal defense costs and any court judgments, but only up to the policy’s limit.  It’s not just effective inside the home, but anywhere in the world the insured may go.  The amount of coverage you’d want depends on how much you have in assets.  Most policies start at $100,000, I generally opt for a $300,000 limit.

4.  What level of additional living expense coverage to I need?  This pays for the cost of living away from home if an insured disaster strikes making your home inhabitable and covers hotel bills, meals and other customary living expenses.  The amount of this coverage varies, usually a percentage of what the dwelling is insured for and also some companies put time limitations on this as well.

5.  Should I buy a separate flood or earthquake insurance policy?  Flood insurance is available from the federal government’s National Flood Insurance Program (NFIP) and from a few private insurers.  Earthquake coverage is usually available in the form of a supplemental policy to your homeowners.

6.  Do I qualify for any discounts?  Usually if you have a burglar alarm and one that is monitored, as well as a sprinkler system, you often can get a reduced premium.  If the plumbing and electrical have been updated, this also may help reduce your premium.  If you are 55 or older and retired, you may even qualify for a discount as well.  And if you have other insurance policies, for example auto, with the same firm, this usually allows you a reduced premium also.