Homeowner’s insurance is an expensive purchase that every homeowner must make to protect themselves financially against accidents and disasters. If you have a mortgage on your home, homeowner’s insurance is required to protect the investment of the lender that provided the money for you to buy your home. As purchasing homeowner’s insurance is not something that a lot of people have experience doing regularly, many people make mistakes when purchasing the insurance that end up costing them a lot of money over time. If you are buying homeowner’s insurance, here are some things that you should know.
The Terms
It is important for you to know the terms that are being used in your homeowner’s insurance policy so that you can choose the best coverage for your needs at the best price. Here are some of the common terms that will be used and their definition.
Premium – The price you pay for insurance, usually annually or monthly.
Deductible – The amount that the homeowner pays out of pocket in the event that they must make a claim against the policy. Choosing a lower deductible will result in higher premium payments to keep the policy in effect.
Liability Coverage – Insurance coverage that pays the medical or legal bills of a person that is injured or harmed on the property.
Replacement Cost – Insurance that pays the full cost of replacing your dwelling or personal property. Be sure that the maximum amount is high enough before signing up for this insurance.
Actual Cash Value – Insurance that pays the current cash value (with depreciation) for personal property or your dwelling. This insurance is often less expensive than insurance that pays the full replacement cost.
Get A Better Deal By Shopping Around
Most people are unaware that they can get a better deal on their homeowner’s insurance by shopping around. Different insurance companies charge different rates for their insurance policies and you may be able to save hundreds of dollars a year by obtaining quotes from several companies before deciding which policy to purchase. When comparing policies, be sure to compare ones with similar coverage levels to ensure that you are getting an accurate comparison. Since you are not required to buy insurance from a particular company, you can choose the company that has the best price for the coverage that you need.
Ensure That You Have Enough Coverage
There are different insurance coverage levels for different types of homes, so you must be careful to choose the coverage level that is right for your home. If the coverage is too little, you may find yourself in a very difficult financial position if the unthinkable happens. However, if you purchase too much coverage, you could be wasting thousands of dollars for no benefit. Go over your options carefully and make sure that you are only buying what you really need.