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Buying Homeowners Insurance

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Tips to know when buying homeowners insurance.

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Tip #1 – Get multiple quotes and compare coverage.  – A mortgage company will require you to have homeowners insurance, but you get to pick the company.  You will want to get the right amount of coverage for your home, but you need to be sure to watch for policy value, do not just focus on the lowest price.    The next two tips will help you compare the quotes you get from different companies.

Tip #2 – Make sure you get adequate coverage.  – The most important part of the policy is the level of coverage.  Here are a few terms that will help you understand your policy.

  • HO-2 – Broad policy that protects against 16 perils.  The perils are named in the policy.
  • HO-3 – Broader policy that protects against all perils except those specifically excluded in the policy.
  • HO-5 – Premium policy that typically protects newer, well-maintained homes; it covers against all perils except those specifically excluded in the policy.
  • HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage, liability coverage and coverage of improvements to the owner’s unit.  Insurance for the actual structure usually comes through the association.
  • HO-7 – Similar to an HO-3 policy, but for mobile homes.
  • HO-8 – Policy specifically for older homes, with similar coverage to an HO-2 policy.  However it only covers actual cash value.

Tip # 3 – Understand your policy. – It’s not enough to just to get the right policy level.  Before you make a decision, you need to understand some terms and how they apply to your policy.

  • Deductible – This refers to the amount you must pay out of pocket before your insurance will pay on a claim.  The higher the deductible the lower the premium will be, but remember you will need to be able to cover the deductible if you file a claim.
  • Liability Coverage – This is coverage which pays medical or legal bills if someone is hurt on your property, usually due to negligence.
  • Personal Property – Sometimes referred to as the contents of your home.  This is tangible property such as furniture, electronics and clothing.
  • Premium. – This is the price you pay for the insurance coverage.  The premium is usually paid annually.
  • Replacement Cost – This is the kind of insurance that pays the full cost of replacing your dwelling or personal property, up to a maximum dollar amount.  Most standard policies offer replacement cost, but you will want to be sure the maximum amount is high enough.
  • Actual Cash Value – This type of policy gives you the current cash value (with depreciation) for personal property or your dwelling.  It’s possible to have actual cash value dwelling coverage but to get replacement cost coverage for your contents.
  • Riders – These are policies you can include on your overall insurance policy to cover specific items.  For instance, expensive antiques, jewelry and artworks are often covered under their own rider because they are too valuable to be covered as regular personal property.

Tip #4 – Customer Service – Finally, you will want to find an agent you trust who represents a company with great service.   A good agent serves as the go-between for you and the company and can help you understand and service your policy.   Most of the time you will only deal with the company when you have a claim, so find one with good customer service reviews.


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