What Kind of Homeowner’s Insurance Should You Buy?

Having a homeowner’s insurance policy is one of the best decisions a homeowner can make. A homeowner’s policy will provide the homeowner with financial compensation in the event that they suffer losses related to their home. It pays for damage or destruction of the structure and contents of the home and will cover legal costs if someone is injured in the home or on the property.

How much it will pay and under what circumstances can vary under different policies, even with the same insurance company. With so many policies and coverage plans to choose from, the process can be overwhelming. The following information may help you decide which homeowner’s policy is best for you.

Replacement Coverage

When deciding which type of homeowner’s policy to purchase, there are several things to consider. First, you want to purchase enough insurance to cover 100 percent of the cost of rebuilding the home should it get damaged or destroyed. You can choose an “actual cash value” policy option that pays you what the property was worth at the time it was destroyed, minus depreciation. You can also choose a “replacement cost” option, which does not factor in the depreciation of the property.

Insurance agent Paul Gazelka of State Farm Insurance highly recommends choosing the replacement cost option. “Make sure you have replacement cost on the dwelling and your personal property,” he counsels. “Actual cash value in personal property is like garage sale value.”

There is also an “extended value” option that will reimburse you up to 20-30 percent over the policy limit and will protect you against things like increased construction costs. It is highly recommended to buy the more comprehensive policy to cover 100 percent of the cost to rebuild your home after damage or destruction.

Content Coverage

You should also consider the contents of your home when deciding which homeowner’s policy to buy. Make an inventory of the home’s contents to determine how much insurance you will need to cover the items in the home.  The best option is to choose a more comprehensive plan so that you will be able to afford to replace everything you own in the event of damage or destruction.

Liability Coverage

Your homeowner’s policy should have enough liability coverage to cover the total amount of your financial assets including your home, investments, retirement accounts, and anything else of value. If you have valuable items in your home – such as expensive artwork or fine jewelry – you will need to add a “personal property provision” to your policy, which will fully reimburse you should those items be damaged, destroyed or stolen. Additionally, if you live in an area where floods or earthquakes are possible, you may want to purchase extra coverage because most standard homeowners policies do not provide protection from these events.

Get Quotes

The best option for choosing the right homeowner’s policy is to obtain at least four quotes from different insurance companies. There are websites that will obtain quotes from several providers for you, such as your state’s insurance department or you can request them individually on your own. Gazelka also had some advice on how to keep your home insurance premiums affordable. He encourages homeowners to purchase policies with a higher deductible to lower the rate. He also said that paying for small claims out of pocket can also be beneficial if your insurance company offers a claim-free discount.

Finally, before you buy homeowners insurance, it is highly recommended that you learn more about the company’s reputation at www.ambest.com, an independent insurance rating organization.

Kathleen Krueger

Kathleen is a full-time freelance writer and owner of Crafter of Words LLC. She specializes in providing high-quality blogs, website copy and email campaigns for businesses. She frequently writes on topics of interest to home owners such as remodeling, storage and moving.

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