Whether you’re looking for an insurance policy for your first home or it’s coming time to renew the one for your current home, here are a few things to ponder before you sign on the dotted line and pay your premium.
Many factors go into determining the cost of your homeowners’ insurance premium. These include the value of your home and how much it’ll cost to rebuild it should it get destroyed by a storm or a fire. The composition of your house (is it made of brick or wood?), how far it is from the fire department or water source, the home’s condition and its claims history are also factors.
It’s important to understand what is and what is not covered by your insurance policy. Different types of homeowners’ policies protect your home and personal property in various ways.
All perils policies, for example, generally insurance against all perils except ones the policy clearly excludes. Other types of policies may insurance only against specific perils named in the policy.
You may add riders to cover things not included or limited by your policy. Examples include damage due to sewer or drain backup and sump pump overflow.
Remember that standard homeowners’ insurance policies do not cover damage from earthquakes or floods. If you want earthquake coverage, you’ll need to add it. If you want flood coverage (and I highly recommend you get it), you’ll need to get a separate flood policy. Flood policies have a 30-day waiting period, so don’t wait until a storm is headed your way to buy one.
Purchase replacement cost coverage, if you qualify. Replacement cost coverage pays the full repair or replacement cost, without subtracting for depreciation for materials of like kind and quality. If you opt for the actual cash value coverage, you may end up absorbing more of the cost out of your own pocket.
I recommend taking the following steps annually to make sure you’re properly covered and that you’re getting the best value:
- Shop around. Premiums insurance companies charge vary. When you go from company to company, make sure you’re making apples-to-apples comparisons, including getting the same type of coverage with the same deductibles.
- Make sure you’re getting the right amount of coverage. Make sure your coverage amount would rebuild your home and restock its belongings if it were destroyed by a fire or a storm. Also, make sure you’re not paying for too much coverage.
- Ask your agent if you qualify for any discounts. Bundling is one common discount offered by insurance companies, where you get a break on your premium by having your homeowners’ and automobile policies with the same company. You may also qualify for discounts if you have security devices, such as burglar and fire alarms. In some territories prone to high-wind damage, you may qualify for a discount by having a fortified roof.
- Consider getting a higher deductible. Generally, the higher the deductible, the lower the premium. Just make sure you can afford to pay the deductible out-of-pocket if you have a loss.
Remember to ask your agent questions if you have them. If you still have questions, you may call a consumer expert at the Department of Insurance weekdays from 8 a.m. to 5 p.m. at 855-408-1212. Or you may visit www.ncdoi.gov.