Having great home insurance protection requires focusing on value not just price
Whether you’re buying a new home or have owned your home for some time, understanding what components make up a solid insurance protection plan for your home, your valuables and your liability is essential. While your home may not change much over the years, insurance isn’t “a set it and forget it” decision. Changes in your life, improvements to your home and changes of construction in the general marketplace can change your insurance needs.
If you’re house hunting, be sure to start thinking about insurance coverage early on and discuss options with an insurance professional to help you think about coverage issues that may impact your home buying decision. If you own a home and haven’t considered your options in years, you might be surprised to know that insurance options are always changing, so it’s wise to review everything periodically and consider alternatives if you’re concerned that you’re not getting a good value. Here are some issues to consider:
___ Buying a new home?
Location, size, construction type and condition affect the cost and availability of home owner insurance. Age of home, condition of roof, construction up to current code, risk of flooding and presence of a swimming pool impact insurance costs. Homes located near the coast generally cost more to insure than inland homes, and typically have a higher windstorm/hurricane deductible. Quality and location of fire department in the city/town and availability of fire hydrants are also insurance rating factors. Ask the current owner for a copy of the insurance lost history report on the home, such as a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report which they can obtain from their insurance company. This will let you know if there have been any past claims, so that you can inquire if it was properly repaired.
___ What would it cost to rebuild your home?
Keep in mind that it typically costs more to rebuild a home than the current real estate market price. For insurance purposes, you want to be adequately insured for replacement cost to ensure you’ll have the funds to rebuild. Companies generally adjust this amount using formulas based on construction costs, but it’s wise to periodically complete a home replacement cost estimator to ensure that you aren’t over- or under-insured. Because replacement costs are estimates, we strongly recommend purchasing an extended or guaranteed replacement cost endorsement that provides additional coverage if repair costs exceed the dwelling coverage limit due to unforeseen circumstances.
___ What would it cost to replace all of your possessions?
The value of furniture, clothing, appliances, electronics and all other contents depreciates over time. Basic policies only provide “actual cash value” which factors in a reduction for depreciation, we strongly recommend having “replacement cost” on the contents, so that you would receive funds to replace possessions at today’s cost of purchase. If you don’t have a home inventory (link to home inventory page) of all your possessions, it’s important to create one. Your possessions might be worth more than you anticipate requiring additional coverage.
___ Do you have high value jewelry, art, antiques, furs, firearms or collections?
Some personal possessions such as jewelry, furs, firearms and silverware have specific theft limits on a homeowner policy, so you may want special insurance protection in the event of a theft. Also, high valued jewelry, art, antiques or other collectibles could account for a large percentage of the personal property limit on your home insurance policy. In such situations, you may want to consider having special coverage for such items by “scheduling” them separately under your home policy. This provides coverage for them in expanded situations as well as covers them separately outside of the general personal property limit, so that you will have protection for all of your possessions.
___ Building code coverage.
Over time building codes change. If you home is damaged, the cost to rebuild/repair may also involve costs to bring your home up to current building codes. Home policies typically have a limited amount of this type of protection called “ordinance or law” coverage, this amount may not be sufficient depending on the age of your home and potential changes to building codes. This option is worth investing in so that you don’t have a shortfall in a major claim.
___ Choose the highest deductible you can afford.
Raising the deductible increases the amount you’ll pay out of pocket if you have a claim, but a higher deductible will lower your premium, which overtime can provide savings. Home insurance should be considered catastrophe insurance to be used in the event of a major loss. A series of small claims can result in losing out on loss free discounts as well as premium increases and potentially your home policy being nonrenewed by the carrier. Be sure you have the deductible available in your savings in case of a claim.
___ Discount opportunities.
Some insurance companies provided discounts in some qualified situations including:
- Home and auto insurance combined multi-policy with same company discount
- New construction
- Central station fire & burglar alarms
- Smoke detectors & sprinkler systems
- Deadbolt locks
- Major home revitalization/renovations
- Credits for having a loss free record
- Loyalty discounts
- Upgrades to plumbing, heating & electrical
- Wind resistant shutters
___ Optional coverages that can be worth spending a little more.
- Earthquake insurance - Earthquake damage is not covered by a standard policy; while New England isn’t a high risk area, it does have a history of quakes.
- Home business – if you operate a business out of your home, business equipment and liability is excluded from home policies unless you specifically purchase coverage with a permitted incidental occupancies endorsement.
- Heating oil leak remediation
- Limited fungi, wet or dry rot, or bacteria coverage increase
- Flood Insurance
- Personal article floater for high value items
- Service line coverage
- Home equipment system breakdown
- Water backup and sump discharge or overflow coverage – excluded from a standard policy, you can purchase some limited coverage in the event of such a situation
- For rental properties:
- Increased rental income protection
- Coverage for furnishings/contents
- Lead poisoning coverage (homes build prior to 1978)
___ Is your home in a flood plain?
If you have a mortgage, your lender will generally require that you purchase flood insurance if your home is in a high risk flood zone. However, flooding can occur in even lower risk zones, and floods are not covered by a home policy. Visit www.floodsmart.gov or call to speak with an insurance professional about flood insurance. The premiums for flood insurance in lower risk zones are less than you might assume, so it's an option worth considering.
____Provide correct information for all application questions.
Providing inaccurate information can result in an inaccurate quote that could leave you underinsured. Be sure to identify any upgrades to your property. Also, inaccurate information provided at the time of application could result in policy cancellation or denial of coverage in a claim situation, which is why answering questions accurately is important.
___ Personal umbrella liability protection.
Lawsuits can result in huge settlements if you or a household family member is found responsible for injuring someone or damaging their property. If you have a pool, a dog, trampoline or anything else that may create additional exposures look for options to expand your liability coverage. A personal umbrella liability policy can provide an extra $1 million+ layer of coverage over and above your home (and auto) policy limits.
At Murphy Insurance Agency, our knowledgeable associates can help you compare options among eight (8) different insurance carriers as well as guide you in making wise decisions about home owner, condominium unit owner and renters insurance. Ultimately, you must decide the level and types of risks you want to insure against based on your needs and budget. Keep in mind that it’s often worth spending a little more to have expanded coverage rather than risk a situation where your policy would not respond with financial support.
Saving money is important. Being covered is even more important. The most expensive policy is one that doesn’t provide needed protection in a crisis.