7 Insurance Tips for Homeowners

7 Insurance Tips for Homeowners

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If you’re planning a home renovation or have recently completed an update or addition to your home, your homeowners insurance should be reviewed to make sure that it covers the current value of your home. In these days of depressed home values, homeowners may mistakenly believe that their coverage is sufficient. This can prove to be a big mistake especially following a major renovation where the home’s value has increased sharply.

Reviewing your contents insurance on an annual basis is wise, but is an especially smart decision as you plan or complete your renovation project. You need to protect your most prized investment by ensuring that adequate coverage is in place.

Let’s take a look at some considerations as you review your home insurance options:

1. Materials used — Your homeowner’s insurance is predicated on a number of things including where you live, access to a fire department, square footage and the materials used. Concerning the latter, wood-frame homes cost more to insure than steel- and cement-framed materials as wood is more likely to be consumed in a fire.

2. Potential hazards — Maybe your home improvement project consists solely of adding a new pool to the yard. Or, maybe you placed a trampoline in the back yard. Either one of these additions can automatically bump up your homeowner’s insurance by at least 10 percent, not necessarily a big cost, but something that must be factored in as you plan your work or assess your job.

3. Guaranteed replacement value — You may think that if your home is a total loss that you’ll be able to replace it completely at no cost to you except for the deductible. This is a mistake many homeowners make: unless you have “guaranteed replacement value” for your home, you may get far less than what you need to replace it. Ask your insurance agent what coverage is offered and make an upgrade, if needed.

4. Raise the deductible — Following a rash of hurricanes that crisscrossed Florida a few years ago, insurance companies were tested like never before. Some went bankrupt. The remaining companies were allowed to raise rates, with some homeowners finding that their costs increased three- or four-fold overnight. You can’t do anything about increased rates, but you can increase your deductible to share some of the burden. If your deductible is currently $500, you can raise it to $1,000, $2,500 or even $5,000. Just remember, you’ll absorb all smaller “hits” to your home.

5. Improve your security — Is that new extension on the rear of your home wired for security? If not, you could be exposing your home to criminal mischief. If your home doesn’t have a security system yet, carefully consider the best system for your home. Some insurance companies will cut your premiums by 15 to 20 percent annually if your home has a sprinkler system and an automatic dial in your fire or police department according to the Insurance Information Institute.

6. Use one insurer — If you’ve been using separate insurance companies for your home and for your vehicles, consider using one company to insure everything. You can find discounts by combining insurance, if you’re a senior citizen and if you stay with the same insurance company for several years. Loyalty counts as does using one insurer.

7. Consider other forms of insurance — Your homeowners insurance protects your from many hazards, but floods and earthquakes are not covered. If you live a flood prone area, you will need to purchase separate insurance, costing an extra $400 per year. If you live in an area where quakes are possible, a separate earthquake policy may be necessary.

Even if you aren’t planning a home renovation project at the moment, reviewing your homeowners insurance annually is a good practice to put into place. If you can’t find your current policy, contact your insurance agent for a copy.

Resources

Investopedia; Insurance Tips for Homeowners; Glenn Curtis

GSA; 12 Ways to Lower Your Homeowners Insurance Costs; Insurance Information Institute

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Categories: Insurance

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".