Homeowner’s Insurance

Checklist: Insuring Your Valuables

Homeowner’s insurance typically covers the market value or the replacement value of your house and its contents.

It can be difficult to put a dollar figure on household furnishings, and it’s tempting to estimate low to avoid big premiums. However, if unique or expensive possessions are stolen, broken or damaged, you will be glad to get financial compensation from your insurance company.

You should review the amount of homeowner’s coverage you have every year to determine whether it is too much or too little for your current needs. Events that might create a need for additional coverage include marriage, renovation and redecoration or an inheritance – any of which can mean acquisition of new and costly possessions.

Here’s a checklist of items that often have significant worth. Use it to make sure you’re taking into account all of your valuables and irreplaceable possessions when you are estimating how much coverage you require:

  • Jewelry made with precious metals and gemstones
  • Silverware, including solid cutlery, teapots, trays and vases
  • Family heirlooms, including jewelry, toys, furniture, paintings and books
  • Antique and hand-crafted furniture
  • Hand-loomed rugs, carpets and tapestries, particularly those that are imported and/or antique
  • Expensive or rare musical instruments
  • Original paintings and other objects d’art such as bronzes
  • Signed prints by well-known artists
  • Antique china, crystal, cutlery, lamps, mirrors and other decorative items
  • Custom-made and/or designer furniture and accessories
  • Top-of-the-line/designer appliances
  • Couture clothing, shoes, watches and accessories
  • Furs
  • A cellar-full of vintage wines
  • Collectibles, such as rare stamps, books, glassware and china

If you don’t know what antiques and family heirlooms are worth, you may wish to get them appraised. To get coverage for rare and extremely valuable possessions, you may need to add a rider to your homeowner’s policy. Consult your insurance agent, broker or your insurance company’s help line to find out.

Benefits of Homeowner’s Insurance

To protect the investment you have made in your home, you need to find a competitively priced insurance policy that provides replacement cost coverage for your house and personal property.

The proper home insurance coverage involves:

  • Buying the right type of policy.
  • Having the proper levels of protection within that policy including special provisions for jewelry, your computer equipment, and other particularly valuable possessions.

Supplementing this coverage with special protection against natural disasters that are not covered in your basic policy.

TIP: Many homeowners think that the policy terms required by their lenders represent adequate levels of insurance, but this may not be true. It is important that you determine your needs and make sure they are reflected in your coverage.

What’s Protected?

Homeowners with mortgages are required by their lenders to have home insurance.

Homeowner’s insurance can also protect your home from:

  • Fire or lightning
  • Windstorms, hail or explosions
  • Riot or civil commotion
  • Damage from vehicles
  • Sudden and accidental damage from smoke
  • Vandalism or malicious mischief
  • Theft and accidental breakage of windows

Why do I need Homeowner’s Insurance? – Could You Afford To Rebuild Your Home Without It?

Homeowner’s insurance provides a safety net to protect what is likely to be your biggest investment – your home – in the event of property damage, theft and even liability. Without homeowner’s insurance, many people would be unable to afford expensive repairs and could even lose their homes.

Just think about what kind of position you would be in if these scenarios occurred, and you did not have homeowner’s insurance to protect you:

  • Lightning hit your house and sparked a fire that destroyed half the structure and most of your belongings.
  • A hurricane or severe thunderstorm tore through your neighborhood and ripped your roof off, destroyed your outbuildings and brought a tree down on your house.
  • Someone broke into your house and stole or damaged thousands of dollars worth of electronic equipment and other valuables.
  • Someone sued you for hundreds of thousands of dollars after injuring themselves on your property.

About 95 percent of homes are protected by homeowner’s insurance, according to a 2003 study by the Insurance Research Council. The Insurance Information Institute (www.iii.org) suggests that you need enough insurance to cover the cost of rebuilding your home at today’s prices, and to meet today’s building codes.

Most homeowner’s insurance policies also cover damage or loss of the contents of your home. But, as with the structure, you need to consider whether you want your coverage to cover the cost of replacing the items, or to reimburse you for their actual value. Replacement-cost homeowner’s insurance costs more, but provides better protection.

Finally, most lenders require you to carry homeowner’s insurance to cover the cost of the mortgage. You can cancel your policy once your mortgage is paid off, but think twice before you do so: homeowner’s insurance really does protect your investment.

Should You Increase Your Insurance Deductible?

You can save money on your homeowner’s insurance by taking on more risk yourself. Here’s how it works.

Most financial experts agree that increasing the deductible on your homeowner’s insurance policy is a good strategy. The higher the deductible on your policy, the lower the premium for your homeowner’s insurance.

Another way of looking at it is that the more risk you take on, the less your home insurance will cost.

The deductible is the dollar amount of losses or damages that you, the policyholder, pay before the insurance company starts paying – the amount that is your responsibility to pay on any claim. For example, if you make a claim that your insurer accepts for $5,000, and your deductible is $250, the insurance company will pay $4,750.

The deductible should not be confused with the premium. An insurance policy’s premium is the amount you pay to keep the policy in force.

Many policies have deductibles of $250. Experts say that by increasing this deductible to $500, you can usually save 10 percent on your premiums. By increasing the deductible to $1,000, you may be able to double your savings.

Deductibles and potential savings:

Increase your deductible from $250 to:

  • $500 and you could save 10 to 12 percent
  • $1,000 and you could save 20 to 25 percent
  • $2,500 and you could save as much as 30 percent
  • $5,000 and you could save as much as 37 percent

Of course, if you are considering increasing your deductible, you must be able to afford to pay the higher deductible should you make a claim. The purpose of homeowner’s insurance is to safeguard you in case of an unforeseen event that damages your home or its contents. If your deductible is too high, it could negate the benefits of having insurance in the first place because the risk you are assuming is too great.

For most people, though, insurance is for serious losses and it’s worth it to have a higher deductible and pay relatively small claims. Why? Whenever you make a claim, it affects your risk profile and your premium will increase.

Avoiding asking your insurer to pay small claims – maintaining a perfect no-claim record – keeps your premiums low and makes renewing your policy easier. The idea is you only use your insurance for a major claim that you couldn’t possibly cope with.

If you opt to increase your deductible, consider using some of your premium savings to safeguard your home and possessions. Invest in improving the security of your home by adding such things as a smoke detector. Often, this kind of improvement makes you eligible for a discount on the cost of your policy.

You should also check to see if your insurance company is giving you a competitive reduction on your premium for a higher deductible. It’s an important question to ask. You can use the bullet points above as a rough guide to the premium reduction you should get, assuming nothing else in your policy changes. But you should do the math or have an insurance company’s sales rep do it for you.

The flip side of your deductible is the coverage limit of your policy. It is the maximum the insurer will pay for what is insured. Like increasing the deductible, lowering the coverage limit will reduce premiums. But you should make sure that a lower coverage limit adequately protects your home and contents.

Sometimes a deductible is built into your policy that you are unable to change. For example, hurricane deductibles on homeowner’s insurance have become more common and have increased in size during the last few years.

Usually they are not dollar amounts but percentages of a home’s insured value.

Insuring Your Home Office

Determine what your coverage needs are, then pick the best option for your business.

There are approximately 11 million home-based businesses in America, and according to the Independent Insurance Agents and Brokers of America, almost 60 percent of them are not insured. This leaves them open to potentially crippling losses due to damage, theft, lawsuits or interrupted operations.

The first step toward protecting your business is to determine your needs:

  • Take stock of your tools and inventory. What would it cost to replace them? Even the basics of a computer and a printer can easily cost more than $2,500 to replace, and that’s usually the maximum your homeowner’s policy will recompense.
  • Consider how long your operations could be interrupted before your business would be adversely affected. If continuity is key to your business, you will need a more comprehensive insurance plan.
  • Think about liability coverage in case someone is hurt on your property. Do clients or delivery people come to your home regularly?
  • Find out whether you need to provide insurance for employees. Some states require that all employees have worker’s compensation coverage, and you may need to pay for health and auto insurance as well.

Depending on your business’ needs, you have four insurance options:

Home Office Policy

This combines homeowner’s insurance with a business policy and can be less costly than adding endorsements or buying separate coverage. Policies vary, but they typically offer greater liability coverage plus coverage for equipment, loss of income and documents and expenses for a period of time while the business is non-operational or has to relocate. This type of insurance is generally suited to small businesses without a lot of inventory, employees or visiting clients.

Business Owner’s Policy (BOP)

The most comprehensive coverage, a BOP will compensate you to an even greater degree for liability and property loss or damage. BOPs also insure the structure that houses your business, so it may overlap with your homeowner’s policy. A BOP may also include coverage of multiple locations or property stored outside your home.

Self-Insurance

Here your business isn’t covered by a company but assumes its own risk. You take the money you would pay into an insurance policy and put it into a bank account to be used if you need it. This option is best used when you have a limited amount of property and little risk of liability.

The cost to insure your home business can be as low as $250 a year. But the more comprehensive your plan, the higher your bill. While you may not be able to reduce your insurance needs, there are ways to reduce your bill.

As with any type of insurance, one way to lower the cost of your policy is to increase your deductible. The more risk you take upon yourself, the lower your rate will be from the insurer.

Another effective strategy is to shop around to make sure you get the lowest rate. The cheapest insurance may not provide the most effective coverage, so make sure that coverage, terms and conditions meet your minimum requirements before signing a contract.

Take steps to avoid claims, which drive up your premiums. Install smoke detectors and other security features, maintain your grounds and equipment well and make backups of all files. Sometimes your insurer will lower your premium if you provide proof you’ve taken measures to reduce your risk.

You should review your policy about once a year or whenever there is a major change in your business.

How To Save Money On Homeowner’s Insurance

Insurance experts cite these 12 ways to cut your premiums. All homeowner’s insurance policies are not created equal, nor do they all cost the same amount. Annual premiums for similar policies can vary by hundreds of dollars, according to the Federal Citizen Information Center.

Here are 12 ways to save on homeowner’s insurance compiled by the Insurance Information Institute and endorsed by consumer groups including the Consumer Federation of America and the National Consumers League:

1. Shop Around

Ask your friends about their homeowner’s insurance carriers, check consumer guides and online insurance quote services. Another good resource is your state insurance department. States often disclose typical rates and the number of consumer complaints received about specific insurance companies. Ask plenty of questions of homeowner’s insurance carriers to get a feeling for the type of service they give and what they would do to lower your costs.

2. Raise Your Deductible

You could cut your homeowner’s insurance premiums by as much as 25 percent by raising your deductible from $500 to $1,000. Some policies have separate deductibles for different kinds of damages.

3. Don’t Confuse What You Paid For Your House With Rebuilding Costs

That price includes the land your house sits on. If you include the land value in the amount you insure, your homeowner’s insurance premium will be higher.

4. Buy Your Home And Auto Policies From The Same Insurer You may be able to save five to 15 percent on both policies. But compare with other insurers to be sure.

5. Make Your Home More Disaster-Resistant

Your homeowner’s insurance representative can tell you what steps you can take to make your home more resistant to windstorms and other natural disasters. For example, steps like adding storm shutters, reinforcing your roof or buying stronger roofing materials can save you money on your homeowner’s insurance premiums.

6. Improve Your Home Security

You can usually get discounts of at least five percent for a smoke detector, burglar alarm or dead-bolt locks. Depending on the insurer, you could cut your homeowner’s insurance premiums by 15 to 20 percent by installing high-end sprinkler systems as well as fire and burglar alarms.

7. Ask About Other Discounts

Some companies discount homeowner’s insurance premiums for retired people because they tend to be home more often. Some employers and professional associations offer group homeowner’s insurance with lower rates, and some insurance companies offer discounts for members of certain professional groups.

8. Maintain A Good Credit Record

Insurers often use credit information to price homeowner’s insurance policies.

9. Stay With The Same Insurer

Some insurers will reduce their homeowner’s insurance premiums by five percent if you stay with them three to five years, and by 10 percent if you keep the policy for six years or more.

10. Review The Limits In Your Homeowner’s Insurance Policy And The Value Of Your Possessions At Least Once A Year

You may be able to cancel extra insurance for items whose full value is not covered under your regular policy, such as expensive jewelry or valuable art work.

11. Look For Private Insurance If You Are In A Government Plan

You may be able to buy homeowner’s insurance at a lower price in the private market.

12. When You’re Buying a Home, Consider The Cost Of Homeowner’s Insurance

Your premiums may be lower if your house is close to a fire hydrant or if, for example, your neighborhood is served by a professional rather than a volunteer fire department. You may also qualify for lower premiums if your electrical, heating and plumbing systems are less than 10 years old. You can check the Comprehensive Loss Underwriting Exchange (CLUE) report of the home to see the homeowner’s insurance claim history of the property.

The full list of ways to save on homeowner’s insurance, and links to state insurance departments, is available at www.pueblo.gsa.gov/cic_text/housing/12ways/12ways.htm. For other tips on homeowner’s insurance, you also can visit the Insurance Information Institute’s Web site at www.insurance.info, or www.iii.org.

Homeowner’s insurance: Protect your home and its contents – You can’t afford not to.

You could look at homeowner’s insurance as one of the necessary evils of home ownership. But if your home is ever damaged by something like wind, hail, fire, or falling tree limbs, or if you’re ever burglarized, you’ll be glad you have homeowner’s insurance to cover the cost.

In fact, homeowners incurred $27.6 billion in losses in 2004, according to the Insurance Information Institute (www.iii.org). The vast majority — 84 percent — of those losses were for property damage and theft, the institute says. Homeowner’s insurance also includes liability coverage if someone hurts themselves on your property.

How It Works

Homeowner’s insurance works like most other insurance plans: You pay monthly or annual premiums for protection against covered losses. Each homeowner’s insurance policy is different in terms of what kinds of losses are covered and the size of the deductible (the amount you have to pay yourself before insurance coverage kicks in).

The Property Casualty Insurers Association of America warns that homeowners need to understand the difference between the market value of a home, the assessed (tax) value, and the replacement cost. Not all homeowner’s insurance policies cover the cost of replacement versus the depreciated value of either the property or the contents of your home.

It’s important to review your homeowner’s insurance policy annually to make sure you have enough coverage. Your home may have appreciated in value, especially if you made home improvements. The cost of replacing the contents could have gone up since you purchased your homeowner’s insurance policy. And, the Property Casualty Insurers Association points out that it costs 10 percent to 20 percent more to rebuild a home than to build a comparable new home.

Some homeowner’s insurance policies will cover the cost of living in a hotel or other lodging while extensive repairs are being made to your home.

What Type Of Damage Will Your Policy Cover?

Most homeowner’s insurance policies will cover damage from fire and so-called acts of God: wind, rain, hail, snow, ice and damage from falling trees or limbs, according to the National Association of Insurance Commissioners.

One major exception is flood insurance, which must be purchased separately from your homeowner’s insurance. Depending on how close you are to a flood plain, your mortgage lender might even require you to purchase flood insurance.

Generally not covered by homeowner’s insurance policies are interior water damage from a storm — unless caused by exterior damage — sewer backups and removal of fallen trees that didn’t land on your house, according to the insurance commissioners group.

Some policies also won’t cover food spoilage from extended power outages, or damage in your home from mold. You may be able to purchase additional coverage, or endorsements, to protect yourself from these kinds of damages.

Most lenders require you to carry a certain level of homeowner’s insurance to protect their investment in the event of a catastrophe. Your insurance premiums can be included in your mortgage payments.

Make sure you ask your lender what their requirements are. Then, consider your particular needs and decide if you want coverage above and beyond what they require. No matter how much coverage you decide to have, one thing is for sure: Homeowner’s insurance is a must.

Home Insurance Savings

Home insurance can be expensive but there are a variety of ways you can reduce the cost. If you own a home, you want to protect your investment with home insurance. And it doesn’t have to cost a fortune. The following five tips can help you save.

  • Be selective when buying a home – Certain homes cost more to insure. To save on home insurance, research the potential cost involved before you make an offer on a home. For example, you may want to avoid buying a home that is situated in a floodplain if it means you’ll have to extra to buy flood insurance.
  • Shop around – You can often save on home insurance simply by taking the time to compare rates. Shop around to see which insurance company can offer you the best deal. Don’t choose a company just because you’ve always used them. Find out which one offers the best rates and has the best customer satisfaction.
  • Use the same company for auto and home – If you use the same company for both your auto and home insurance policies, you may be able to get a discount on your home insurance. Be sure to discuss this with your insurance company.
  • Improve your security and safety – Many insurance companies offer discounts for adding safety features to your home. For example, there’s a good chance you can obtain a better rate on your home insurance if you install a home security system. Ask your insurance company if this is the case.
  • Don’t over-insure – You can save on home insurance by not over-insuring your home. Remember, you don’t need to insure the value of the land, just the value of the home. Also, if any of your possessions are included in your policy, make sure they have maintained the value for which they are insured and that they are something you actually still own.
  • Do a yearly check of your policy – Make sure that it is accurate and still fits your insurance needs.
  • Be patient and do your homework – A little legwork can really pay off when trying to save on home insurance.