Do I Need Homeowners Insurance?

Do I Need Homeowners Insurance?

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You’ve just received your homeowners insurance bill and your premium went up. Again. After 15 years of making payments and sending out thousands of dollars of your hard-earned money, you’ve had enough. Your house is paid off and you’re not required to have homeowners insurance, so in a fit of desperation you pick up your phone to place a call to your insurer.

Canceling Insurance

If that call means you’re planning to cancel your homeowners insurance, expect your insurer to argue its case for you to keep your house insured. Certainly, your insurance agent may want you to stay with her company, but she also knows that an uninsured home is one that is not sufficiently covered. Listen to her: she has your best interests in mind.

Most homeowners can’t escape having homeowners insurance even if they want to as their lenders require this coverage to protect the company from total loss. The moment your homeowners insurance lapses, your lender will be contacting you and telling you that they took out a separate policy for you. Moreover, that policy will be charged to you and oftentimes the cost is far greater than one you could have purchased on your own.

Catastrophic Loss

Clearly, having homeowners insurance is smart as it will protect you if there is a catastrophe. No, you don’t need to see a tornado come along that would sweep your home off of its foundation to require insurance. Smaller damage, such as blown out windows and doors, a tree that falls on your roof or other, lighter property damage can be costly. You’ll need to pay out of pocket to make repairs which can cost you tens of thousands of dollars or far more than what your insurance premiums have been since you bought your home.

Instead of canceling your homeowners insurance, consider how you might cut your premium. Therefore, let’s take a look at some money saving options that can help to reduce your homeowner’s insurance bill:

Your coverage — The type of insurance your have on your home will go far in dictating rates. For example, for the lowest insurance, the actual cash value is the most affordable as it pays you for the cost of your home minus depreciation. Choose replacement cost and the deduction is not factored in. Select guaranteed or extended replacement cost and your insurer will pay whatever it costs to rebuild your home. The latter option is the most comprehensive and is, therefore, the most expensive.

Your deductible — The lower your deductible, the higher your premium. The opposite is also true. You can save money by raising your deductible, which is your way to absorb some of the costs of insurance. This may prove beneficial in areas of the country where people are paying thousands of dollars each year for insurance. Raise your deductible from $500 to $1,000 or more and you’ll reap the savings up front.

Your company — Shopping around for insurance can yield big savings even when coverage remains the same. Homeowners are often surprised to find that Company A charges 10 percent or more for coverage offered by Company B. Although the insurance industry is regulated by the states, the differences between companies may yield significant savings.

Your insurance — Yes, it is true that if you insure your home and cars on the same policy, you’ll get a discount, usually 10 percent. But, that discount may not be on both policies, rather on whichever one is lower. Ask your insurance agent what savings you can expect. Keep in mind your address, your credit rating, employment status and the number of claims you’ve file can affect your insurance rates.

Insurance Options

Certainly, a minimal insurance policy is better than no insurance when it comes to your home. Some people have learned the hard way following a disaster that they should have had coverage. Don’t make that mistake, one that you may never recover from.

Resource

Investopedia; The Beginner’s Guide To Homeowners’ Insurance; Marcy Tolkoff; Jan. 2011

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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".