Before You Buy Insurance

Property insurance on your home is normally a requirement of getting a loan. A house is a person’s largest asset. Make sure that investment is covered in a way that makes sense to you. Insure the house itself and its contents. Things to consider before you purchase insurance:

How much insurance is needed? When a property is purchased it includes land, the physical structure and outbuildings. Bottom line – do not buy insurance on dirt; only buy coverage on the physical structure and its contents. This means that the insurance amount will be less than the purchase price.

Is replacement cost necessary? Short answer – yes. Many insurance agents use a cost estimator to figure cost replacement estimates. This means that you are insured for the insured for the correct amount. Note that Replacement Cost Coverage, which means each insurance company determines, will designate a percentage of additional coverage on top of the insured amount. A local agent will know best about what that percentage should be.

Deductibles: Just like car insurance the larger the deductible the bigger savings on the cost of a policy. Deductibles can be as low as $500 or as high as $10,000. If there is a mortgage involved the maximum deductible is often dictated by the terms of the loan (often it is $1,000).

Exclusions: What is covered under a homeowner’s policy may differ on locations. Before buying ask the agent about what is excluded under the policy. For instance computers and jewelry are often excluded. In some areas perils such as landslides, floods, wind damage (AKA hurricanes), mine subsidence, mud slides, mud flows, volcanic eruptions, surface water, sewage and a long list of other problems. Each policy will have an exclusion statement. There are very clear and concise but you need to know what is covered.

Liability Coverage: The liability part of the homeowner’s policy is very important. Its purpose is to protect the owner from financial disaster if someone files suit against the homeowner or if the courts hold the homeowner legally responsible for someone else’s injury or property damage. Most policies carry a standard limit of $100,000. If you have a high net work it is advisable that this amount be increased.

Give the insurance agent some time: People assume that once you call an agent, that insurance is a foregone conclusion. The agent needs to make sure that the property is insurable. Thus they will ask you a lot of questions about the home and then physically inspect it. Some homes may not be insurable at the best rate based on specifics like its age, Where is the home located or it access (or lack of access) to fire protection. Don’t call the morning of the closing and expect the policy to be there before 10.

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