When comparing homeowners insurance quotes, there are
several factors that need to be addressed specifically:
1- how much is the dwelling (the house itself exclusive
of the contents) insured for? Can you rebuild your home
for this amount? With building costs skyrocketing
nationwide, a house insured for $100,000 6 years ago may
be underinsured because it would cost more than $100k to
rebuild it. In New York, where we are located, there is
a housing boom going on that has lasted quite a few
years and in this area, you cannot get a contractor to
build you a double dormer for $100k. Imagine that. Just
ten years ago, we had prices of $60,000 to double dormer
a cape and now, our neighbor is spending near $200,000
to expand and dormer. That is more than most houses cost
in half the country! Case in point- can you rebuild your
house for the amount it is insured for?
2- do you have jewelry, computers, furs, silverware,
etc.? These items all have limited coverage on most
policies. For example, some policies only cover $2000 in
unscheduled (unscheduled means that you didn't supply an
appraisal for each piece and list it separately on the
policy for an additional premium per thousand dollars in
coverage) jewelry. Let's say you own three watches and
perhaps a few rings, the total value of which is $6000.
If you only have $2000 in coverage, you will not be able
to replace everything that was lost in a fire or
robbery. The same goes for computers. All policies have
a limit on personal computers. If you have a monster
gaming machine that cost $5k to build it might be worth
the peace-of-mind to schedule it for two years.
3- how much liability coverage is enough? That's a
relative question and differs for each person. The
difference between the minimum a company offers and the
maximum isn't a huge difference in premium. There are
two common arguments with regard to liability- one is
that if you have $500,000 or perhaps $1,000,000 in
coverage, the attorneys are more likely to bring a
larger suit in the event of a claim. I once heard of a
claim where at a 4th of July party, the host lit a
rocket that took out a guest's eye. Guess how much they
won?? The maximum the policy would pay. It wouldn't have
mattered if the host had $50,000 or $5,000,000, chances
are the guest was getting it all. Weigh the options,
consult an attorney if necessary and make a decision.
But above all, do not base it on whether you will save
$22 by taking $100,000 in coverage instead of $300,000.
Your agent can help with this one.
4- is replacement cost coverage on the dwelling and your
personal property necessary? Without the
coverage, you are stuck with the limits the policy
offers. Here's an example in plain English. Let's say you didn't choose
personal property replacement cost coverage because it was $61
more in premium annually. Now, the house burns to the
ground and everyone was out at work when it happened.
Without guaranteed replacement cost coverage on your
contents, you will
be getting the depreciated value of everything you owned
that wasn't attached to a wall or scheduled. So if your
couch was $1900 and is 5 years old, it is likely worth
less than 50% of its original value so that's what you
will be receiving. Imagine all of your socks, clothing,
etc. that are used... then think of what they fetch at a
garage sale. Pretty scary. Guaranteed replacement cost
contents coverage on a homeowners policy is a gift as far as I'm
concerned. Who else will replace all of your stuff with
brand new for a few hundred dollars per year in premium
(if you have homeowners insurance in Texas or Florida,
you're likely paying a few grand- unfortunately)?
Guaranteed replacement cost coverage on the dwelling
requires that you insure it adequately in the first
place, so don't think you can insure a $500,000 building
for $90,000 and take the replacement cost coverage for
an extra $18. The companies are smarter than that and
have a stipulation regarding you insuring it properly in
the first place thereby limiting their risk that they
will have to pay more than you have insured the building
for.
5- Finally, if you have a policy, be sure to compare
the current coverages to those proposed by the company,
agent or broker you solicit quotes from. Then ask if you
are losing any coverages on the policy he or she is
quoting. After reviewing any difference, ask if there
are any optional coverage you should have
that you currently don't. Here's a good one: my brother
didn't have back up of sewers and drains coverage and of
course the town sewer backed up forcing several inches
of poisonous raw sewage through the basement shower
drain. The ensuing cleanup cost him about $3500. He had
to pay it out of pocket, then wait 6 months to be
reimbursed by the town. Not a good position to be in.
Problem is, if you don't ask about possible coverages,
you'll never know that you are missing a valuable
coverage. This is the problem with buying on price
alone!
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