The ABC’s of Home Insurance

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Real Estate

You can save quite a bit a year on home insurance, just by doing a little bit of research to become familiar with home insurance policy basics.

Premiums & Discounts with Insurance

Higher deductibles will lower the premium the insurance company charges. The key is having enough savings in the bank to cover any emergency expenses. There are many discounts offered for smoke detectors, burglar alarms, dead bolts, fire extinguishers, and Neighborhood Watch programs, and third-party alarm systems. Often, if you bundle your coverage (home, auto, etc.) you will be offered another discount. Take advantage of these and shop around for the best deal!

Going without a claim for 3–5 years may get you a discount also. Some insurance companies reward longevity of service with a discount; and can offer discounts to people who have paid off their mortgage. Don't forget to let your insurance know if you are a non-smoker, taken early retirement, or have a live-in-housekeeper. You can even get a discount if your home was built or rebuilt within the last 10–15 years. New roof? Ask for a discount!

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Home Insurance Coverage

Mortgage lenders require borrowers to carry insurance, even if you own your home outright.

Policies pay settlements on the actual cash value or replacement cost. The “actual cash value” method entitles the owner to the depreciated value of the damaged property. The “replacement cost” coverage model, costs more, but pays the amount to actually replace lost or damaged items.

"All risk" policies cover losses from any peril not specifically excluded from the policy. A "named perils" policy covers losses only from perils specifically listed in the policy. Be sure to check out flood and earthquake insurance add-ons in lieu of an “all risk” policy.

A homeowner’s policy basically covers:

  • Dwelling and Personal Property. This should cover damage to the structure.
  • Personal Liability. If someone trips on your steps and sues, this may cover the legal fees.
  • Medical Payments. This may cover medical treatment for visitors who suffer injury or illness in your home.
  • Additional Living Expenses. If your home becomes uninhabitable, this may cover expenses for time in a hotel.

You are responsible to notify the insurance for loss recovery. To prevent losing coverage and to increase your ability to get a settlement: notify carrier immediately; make repairs to prevent further damage; create a list personal items damaged; schedule an insurance representative to see the damage; and finally, complete a statement explaining circumstances for the insurance company.

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