First thing’s first: Talk to multiple agents. David Thompson, an instructor with the Florida Association of Insurance Agents in Tallahassee advises people to speak with multiple agents and that the biggest mistake consumers make is buying a homeowners policy solely because it has lowest annual premium.
Know what IS covered:
If your home and its items were damaged or destroyed, generally your policy would cover “replacement cost” which is an estimate of what it would take to repair or rebuild it and to replace your belongings.
Replacement cost is typically calculated from insurance companies’ formulas and they have a number of ways of arriving at those formulas, Thompson said. The homeowner will supply basic information and the insurers will add in other current cost data.
Along with the structure and contents, insurance generally offers a certain amount of liability protection someone is hurt in a slip-an-fall accident in your home. It also should cover living expenses if you’re unable to live in the home because of fire, etc.
Standard policies usually spell out what is covered such as fire, theft, hail, lightning, etc.
Know what is NOT covered:
Policies don’t often cover damage from floods, sewer backups, earthquakes and a few other unfortunate circumstances. Separate coverage for such events may be a good idea, especially if you live in a flood-prone or earthquake-prone zone.
Hurricanes are a special category unto themselves and the deductible (the amount the policyholder pays out-of-pocket before the coverage kicks in) is not usually a set amount; typically, it’s based on a percentage of the insured value, up to 5 percent.
If you’re planning to operate a business from your home, your business equipment most likely wouldn’t be covered in a homeowners’ claim.
In covering your possessions, insurers suggest that the best thing you can do for yourself is to take an inventory of what you own and update it constantly. Standard policies have limits on how much they may pay for your items, so if you have particularly valuable items such as furs, jewelry, etc., you may want to consider purchasing a “floater” or “rider,” which is separate coverage for those items’ full value.
Consider your deductible:
Policies usually have a deductible amount, so if a loss occurs, it’s a sum the policy holder would pay before the insurance coverage kicks in. Deductibles are commonly $500 or $1,000, but they can vary. The higher the deductible amount, the lower the premiums will be.
Some policies may have a “percentage deductible.” For example, if your house is insured for $100,000 and you have a 2 percent deductible, then $2,000 would be deducted from the amount of your claim if the house is a total loss.
For the full article on home insurance 101, click here!