4 Things To Look For In A Home Insurance Policy
Buying a new home can be considered a significant investment. You’ve spent a considerable amount of money to cover the purchase price and other relevant expenses. Because of this, you’ll do everything to ensure the upkeep of your home and safeguard it against any unforeseen event. This is where home insurance enters the scene. It’s a type of insurance designed to insure your home and your possessions in case of a destructive or unexpected event.
However, if you’ve never purchased home insurance before, you might not know which one is right for your situation. You might not even have any idea what makes an insurance policy good or bad.
So, before choosing a new home insurance policy, below are the four things to look for in it:
As someone buying home insurance for the first time, you need to check out the coverage options available in your situation. Typically, a reputable insurer like OpenHouse offers the following standard insurance coverage options:
- Damage to your house: Under this coverage, the insurance company will compensate you for the repair or replacement in case of damage due to covered natural disasters, such as hurricanes, fire, lightning, and vandalism. However, there are certain damages or losses to your home and belongings that aren’t generally covered by the policy. These specific provisions in an insurance policy are known as exclusions. In that case, you may need a separate policy to ensure comprehensive protection.
- Personal liability for injuries or damages: This coverage safeguards you against lawsuits filed by other people. For example, if your dog has bitten your neighbor, whether in your place or theirs, your insurance company will pay for the medical expenses under your liability coverage.
- Additional living expenses: If you want to get compensated if you have to live outside your home during repair or renovation, you also need to look for a home insurance policy that covers additional living expenses.
Indeed, there are several coverage options to consider when looking for the right home insurance policy. For this reason, it’s essential to understand the type of coverage your home needs and work with an insurance company that provides it.
Level Of Coverage
Aside from the different coverage options, you should also consider a home insurance policy with the right level of coverage. It’s essential to know that home insurance options aren’t created equal. Some come with cheap premiums, while others offer expensive ones. This means that the less costly your policy is, the less amount of coverage or protection you’ll get.
Thus, if you’re reviewing home insurance policies, it’s best to look for the following levels of coverage to help you make the right purchase decision:
- Actual cash value: It covers the value of your home and belongings after detracting particular depreciation value or the current worth of the items, depending on your home’s age and contents.
- Replacement cost: It covers the cost of your home and the value of belongings without deducting depreciation value. Generally speaking, it’s the best option if you want to repair your home based on its original value.
- Guaranteed or extended replacement cost/value: It’s considered the most comprehensive level of coverage because it aims to pay whatever costs are required to rebuild your home despite reaching beyond the policy limit. However, even if the policy offers more coverage, there’s a ceiling that needs to be observed, which is approximately 20% to 25% higher than the standard policy limit.
When checking out home insurance policies, it’s also essential to look at the deductible. It refers to the amount of money you should pay from your pocket before the home insurance starts to cover the costs for damage or losses. Generally, if you choose an insurance policy with a higher deductible, you’ll have to pay lower monthly premiums. If the policy has a lower deductible, you’ll need to make higher monthly insurance premiums.
With those things in mind, make sure to consider your current finances before making a decision. Read the insurance policy first before committing to it to avoid financial problems down the road.
Some home insurance policies provide a provision for discounts or reductions in the usual price of the insurance. For example, the insurance policy you consider might allow you to avail yourself of some discounts if you have a home security system that reduces the risk of break-ins or robbery. So, if you want to save some money on your home insurance, look for a policy that discusses how specific discounts can be given.
Shopping around for home insurance can be stressful at times. But, it doesn’t have to be as long as you know what to look for in a policy. So, keep the information mentioned above in mind to find the one that suits your budget and other personal needs.