6 Things You Should Know About Homeowners Insurance
If, as is often the case, your home is your biggest investment, it stands to reason you want to protect it against damage, theft or other disasters. Your lender, who also has a stake in the property, wants to protect it, too. In fact, they will require proof of insurance coverage before you can close on the purchase.
If you are ready to purchase homeowners insurance, here are six things you need to know:
1. There Are Different Types of Policies.
Policies differ in terms of what they cover, so be sure you understand what you are buying. Does the policy protect you in case of any disaster except those omitted in the policy, such as flood damage? Does it include total replacement coverage? Coverage if someone is hurt on your property, and/or loss of personal belongings? The more substantial the coverage, the more the policy will cost.
2. Not Everything Will Be Covered.
If you’re covered up to $2,000 on personal belongings, for example, and your $4,000 ring is stolen, you won’t be fully reimbursed. But if your luggage is lost or stolen while you are traveling, you will be covered up to the policy limit.
3. Home Maintenance Counts.
Damage incurred because of homeowner negligence, such as failure to fix a longstanding slow leak, will likely not be covered. Also, some companies are leery about dog breeds known to bite, so be sure your dog is covered—and keep potentially dangerous breeds contained.
4. Your Credit Score Counts.
Except in Maryland, California and Massachusetts, insurance companies use credit-based insurance scores to predict losses and determine which customers are more likely to file claims. The scores also evaluate your outstanding debt, length of credit history, whether you pay bills on time, etc. The higher your insurance score, the lower your premium will be.
5. Document What You Own.
Keep receipts and appraisals for your belongings and maintain a list of personal possessions and their value.
6. Ask About Discounts.
Will your premium be discounted if you buy other insurance, such as auto or life insurance, from the same provider? Will making home enhancements, like adding a security system, lower your premium?