Homeowners insurance is pretty complicated. In order to find the policy that’s right for you, it’s important to understand how it works and exactly what’s covered. Shopping for a policy based only on price can get you into a lot of trouble down the road when you discover that you aren’t covered as much as you thought you were.
Let’s start with the basics. There are two general components to home insurance: property coverage and liability. Property coverage includes your dwelling, other structures on the property, and personal property. The “other structures” include the garage, as well as guest house, tool shed, or similar buildings; this category does not include buildings that are used for business or rented or leased to others. Liability coverage protects against a claim or lawsuit brought by someone who is injured on your property or by something you do. The claim can also be for damage to someone else’s property if it is caused by something for which you are responsible. These two components combine to generate a premium that is calculated mainly from the value of your house and property, as well as how much coverage you want.
Farmers insurance offers comprehensive property coverage that will cover all your property and assets in the event of any peril, with the exception of items or causes of damage that are specifically excluded. These could include unique or valuable items such as fine art or jewelry, as well as disasters like earthquakes or floods; you can always add a floater to your policy for additional coverage. This policy carries the advantage of covering just about everything while also paying claims on a replacement cost basis rather than paying less because of depreciation to the value of your property. All of this coverage adds up to a dollar amount limit that Farmers will pay. Also included in many home policies is ‘extended replacement cost’, which in the case of a Farmers policy will pay up to 125% of the dwelling limit in. To start to understand how much coverage you need, think about how much it would cost to completely rebuild your home if it were to burn down. Perhaps you’ve been offered a quote that you think is too high, but it helps to take into account every cost that would be incurred if you lost everything, since your insurance company certainly is. We’re not only talking about your house and what’s in it; your insurance would also cover all the hotel bills and restaurant meals that you’d otherwise have to pay for if you lost your home, cleaning up the wreckage and debris after a loss, paying for not just the materials to rebuild but also the labor and design costs, etc.
Now that you’re thinking about everything you need covered, let’s talk about how to lower that premium. Keeping your house safe is presumably important to you, and insurance companies like it too. Don’t smoke? Farmers offers a discount. Other safety measures such as renovating your home, replacing your roof, installing security devices, or just having a new home will also get you a discount. Additionally, you can combine your home policy with another one like auto or life to reduce your premium. Remember that homeowners insurance is designed as a safety net rather than just a way to avoid paying for minor damage to your house. It is therefore a good idea to avoid filing claims for smaller incidents, such as if a bird hits your house, as this could result in higher premiums and even denied claims in the future. It may also be a good a idea for you to raise your deductible; while this means that you’ll have to pay more out of pocket if you make a claim, it will lower your premium, and paying a slightly higher deductible would be the last thing on your mind in the event of a disaster.
Once you’ve got a solid policy in place, it’s important to review it regularly in order to make sure that it still makes sense and that your insurance company knows everything it’s responsible for. If you’re renovating your home, let your insurance company know; not doing so could make you responsible for the cost of rebuilding the renovation.. You might also need to bump up your liability limits if your contractors don’t have adequate workers compensation insurance, since you could find yourself in the middle of a lawsuit if a worker is hurt on your property. A review is also necessary if you’re getting married, since this essentially means combining two households worth of stuff into one. Taking a detailed inventory to revise your policy will most likely be cheaper than paying for two policies for two homes. This inventory will also help you in the event of a divorce, since you’ll know who owns what. Lastly, you may want to revisit your liability policy if you get a pet; you might get sued if your new pooch isn’t as nice as you thought.
All of this research and continued attention paid to your policy will ensure that your coverage is adequate, stable, and reasonably priced. If you originally weren’t entirely clear about what your home policy was doing for you, making the appropriate changes to your coverage will most likely result in a slightly higher premium. But a more detailed knowledge of homeowners insurance also provides you with ways to reduce that premium. Most importantly, a solid home policy gives you a sense of security about your home and possessions, and it will give you a financial escape plan if disaster strikes.