Homeowners' insurance isn't a luxury, it's a necessity. In
fact, most mortgage companies won't make a loan or
finance a residential real estate transaction unless the
buyer provides proof of coverage for the full or fair value of
the property (most of the time this is the purchase price). In
this article, we'll show you some simple actions you can
take to make sure your homeowners' insurance is sufficient
for your needs.
For background reading, check out Exploring Advanced
Insurance Contract Fundamentals and Fifteen Insurance
Policies You Don't Need .
Homeowners' insurance can be very expensive. Those that
live in high-risk areas such as close to major waterways,
known earthquake fault lines or other high claims areas will
pay the most for coverage. In fact, those in high-risk areas
are often forced to pay annual premiums in the many
thousands of dollars. But even homeowners in relatively
sedate, suburban neighborhoods (with property values
around the national average of $210,000) could pay
between $500 and $1,000 a year for a basic policy.
SEE: Understand Your Insurance Contract
The good news is that although you can't (and shouldn't)
avoid purchasing homeowners' insurance, there are ways to
minimize the cost.
Here are six ways to make sure you get the right coverage
and consequent compensation for your home:
1) Maintain a Security System and Smoke Alarms: A burglar
alarm that is monitored by a central station, or that is tied
directly to a local police station, will help lower the
homeowner's annual premiums, perhaps by 5% or more. In
order to obtain the discount, the homeowner must typically
provide proof of central monitoring in the form of a bill or a
contract to the insurance company.
Smoke alarms are another biggie. While standard in most
modern houses, installing them in older homes can save the
homeowner 10% or more in annual premiums. Of course,
even more importantly, in case of fire, they could save your
life!
To find out more about homeownership, see A Tax Primer
For Homeowners and Mortgages: How Much Can You
Afford?
2) Raise Your Deductible: Like health insurance or car
insurance, the higher the deductible the homeowner
chooses, the lower the annual premiums. However, the
problem with selecting a high deductible is that smaller
claims/problems such as broken windows or damaged
sheetrock from a leaky pipe, which typically will cost only a
few hundred dollars to fix, will most likely be absorbed by
the homeowner.
3) Look for Multiple Policy Discounts: Many insurance
companies give a discount of 10% or more to their
customers that maintain other insurance contracts under
the same roof (such as auto or health insurance). Consider
obtaining a quote for other types of insurance from the
same company that provides your homeowners' insurance.
You may end up saving on two annual policy premiums.
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Account
4) Plan Ahead for Construction: If the homeowner plans to
build an addition to the home or another structure adjacent
to the home, he or she should consider the materials that
will be used. Typically, wood-framed structures (because
they are highly flammable) will cost more to insure.
Conversely, cement- or steel-framed structures will cost
less because it is less likely to succumb to fire or adverse
weather conditions.
Another thing that most homeowners should, but often
don't, consider is the insurance costs associated with
building a swimming pool. In fact, items such as pools and/
or other potentially injurious devices (like trampolines) can
drive annual homeowners' insurance costs up by 10% or
more. This may seem like a small price to pay given the joy
these items bring, but it is still something that should be
considered by the homeowner prior to purchase or
construction.
5) Pay Off Your Mortgage: Obviously this is easier said than
done, but homeowners that pay off their mortgage debts
will most likely see their premiums drop. Why? The simple
reason is that the insurance company figures that if you
own the home outright, you'll take better care of it.
6) Make Regular Policy Reviews and Comparisons:
Investors should, at least once per year, compare the costs
of other insurance policies to their own. In addition, they
should review their existing policy and make note of any
changes that might have occurred that could lower their
premiums.
For example, perhaps the homeowner has disassembled the
trampoline, paid off the mortgage, installed a burglar alarm
or installed a sophisticated sprinkler system inside his or
her home. If this is the case, simply notifying the insurance
company of the change(s) and providing proofs in the form
of pictures and/or receipts could significantly lower
insurance premiums.
Look for changes in the neighborhood that could reduce
rates as well. For example, the installation of a fire hydrant
within 100 feet of the home, or the erection of a fire
substation within close proximity to the property may lower
the homeowner's annual premiums.
Additional Items
The following are characteristics that all homeowners'
insurance policies should carry:
Guaranteed Replacement Value Insurance:
All homeowners should buy "guaranteed replacement
value" homeowners insurance. This means that their home
will be rebuilt in the event of a disaster - no matter what the
cost. Of course, many of you may be thinking that this is
what would happen anyway, right? Wrong. Because home
values have increased substantially in recent years, it
probably costs more to build a house than when you
originally purchased your home and your insurance policy.
The good news is that guaranteed replacement value
policies will absorb the increased costs and provide the
homeowner with a cushion if construction prices increase.
Endorsements: Legally speaking, an endorsement is an
amendment to the basic homeowner's policy. Practically
speaking, it is a way for homeowners to ensure that their
high-priced possessions will be insured in the event of a
disaster.For example, a woman wanting to insure her
diamond engagement ring would obtain an endorsement to
her homeowners' policy in order to prove not only that she
owned the ring, but also its value. She would do this by
obtaining a formal appraisal of the ring from a jeweler, and
then sending the appraisal to the insurance carrier for
special notation on the insurance contract. Formal
endorsements such as these will help in the claims process
and ensure that the homeowner gets the full dollar value of
the item if it is lost, stolen or damaged in a disaster. Typical
items that are endorsed in addition to jewelry include furs,
antiques and collectibles.
Wrapping It All Up
To avoid any discrepancies and any delays in receiving
your insurance money for your home, make sure you
document everything . Photograph and videotape the entire
contents of your home and the home itself. Then store these
photos and videotapes in a fireproof box. In addition,
consider storing a copy of the photos at a relative's house,
and/or in a safety deposit box. Doing this will help
homeowners compile an inventory of their possessions
(which is what the insurance company will demand) after a
disaster. It will also, by extension, dramatically shorten the
length of the claims process if a disaster does occur.
Homeowners' insurance is a necessity. There are ways to
save money, but there are also some features that
homeowners shouldn't skimp on. Make sure you know the
difference.
fact, most mortgage companies won't make a loan or
finance a residential real estate transaction unless the
buyer provides proof of coverage for the full or fair value of
the property (most of the time this is the purchase price). In
this article, we'll show you some simple actions you can
take to make sure your homeowners' insurance is sufficient
for your needs.
For background reading, check out Exploring Advanced
Insurance Contract Fundamentals and Fifteen Insurance
Policies You Don't Need .
Homeowners' insurance can be very expensive. Those that
live in high-risk areas such as close to major waterways,
known earthquake fault lines or other high claims areas will
pay the most for coverage. In fact, those in high-risk areas
are often forced to pay annual premiums in the many
thousands of dollars. But even homeowners in relatively
sedate, suburban neighborhoods (with property values
around the national average of $210,000) could pay
between $500 and $1,000 a year for a basic policy.
SEE: Understand Your Insurance Contract
The good news is that although you can't (and shouldn't)
avoid purchasing homeowners' insurance, there are ways to
minimize the cost.
Here are six ways to make sure you get the right coverage
and consequent compensation for your home:
1) Maintain a Security System and Smoke Alarms: A burglar
alarm that is monitored by a central station, or that is tied
directly to a local police station, will help lower the
homeowner's annual premiums, perhaps by 5% or more. In
order to obtain the discount, the homeowner must typically
provide proof of central monitoring in the form of a bill or a
contract to the insurance company.
Smoke alarms are another biggie. While standard in most
modern houses, installing them in older homes can save the
homeowner 10% or more in annual premiums. Of course,
even more importantly, in case of fire, they could save your
life!
To find out more about homeownership, see A Tax Primer
For Homeowners and Mortgages: How Much Can You
Afford?
2) Raise Your Deductible: Like health insurance or car
insurance, the higher the deductible the homeowner
chooses, the lower the annual premiums. However, the
problem with selecting a high deductible is that smaller
claims/problems such as broken windows or damaged
sheetrock from a leaky pipe, which typically will cost only a
few hundred dollars to fix, will most likely be absorbed by
the homeowner.
3) Look for Multiple Policy Discounts: Many insurance
companies give a discount of 10% or more to their
customers that maintain other insurance contracts under
the same roof (such as auto or health insurance). Consider
obtaining a quote for other types of insurance from the
same company that provides your homeowners' insurance.
You may end up saving on two annual policy premiums.
FXCM -Online Currency Trading Free $50,000 Practice
Account
4) Plan Ahead for Construction: If the homeowner plans to
build an addition to the home or another structure adjacent
to the home, he or she should consider the materials that
will be used. Typically, wood-framed structures (because
they are highly flammable) will cost more to insure.
Conversely, cement- or steel-framed structures will cost
less because it is less likely to succumb to fire or adverse
weather conditions.
Another thing that most homeowners should, but often
don't, consider is the insurance costs associated with
building a swimming pool. In fact, items such as pools and/
or other potentially injurious devices (like trampolines) can
drive annual homeowners' insurance costs up by 10% or
more. This may seem like a small price to pay given the joy
these items bring, but it is still something that should be
considered by the homeowner prior to purchase or
construction.
5) Pay Off Your Mortgage: Obviously this is easier said than
done, but homeowners that pay off their mortgage debts
will most likely see their premiums drop. Why? The simple
reason is that the insurance company figures that if you
own the home outright, you'll take better care of it.
6) Make Regular Policy Reviews and Comparisons:
Investors should, at least once per year, compare the costs
of other insurance policies to their own. In addition, they
should review their existing policy and make note of any
changes that might have occurred that could lower their
premiums.
For example, perhaps the homeowner has disassembled the
trampoline, paid off the mortgage, installed a burglar alarm
or installed a sophisticated sprinkler system inside his or
her home. If this is the case, simply notifying the insurance
company of the change(s) and providing proofs in the form
of pictures and/or receipts could significantly lower
insurance premiums.
Look for changes in the neighborhood that could reduce
rates as well. For example, the installation of a fire hydrant
within 100 feet of the home, or the erection of a fire
substation within close proximity to the property may lower
the homeowner's annual premiums.
Additional Items
The following are characteristics that all homeowners'
insurance policies should carry:
Guaranteed Replacement Value Insurance:
All homeowners should buy "guaranteed replacement
value" homeowners insurance. This means that their home
will be rebuilt in the event of a disaster - no matter what the
cost. Of course, many of you may be thinking that this is
what would happen anyway, right? Wrong. Because home
values have increased substantially in recent years, it
probably costs more to build a house than when you
originally purchased your home and your insurance policy.
The good news is that guaranteed replacement value
policies will absorb the increased costs and provide the
homeowner with a cushion if construction prices increase.
Endorsements: Legally speaking, an endorsement is an
amendment to the basic homeowner's policy. Practically
speaking, it is a way for homeowners to ensure that their
high-priced possessions will be insured in the event of a
disaster.For example, a woman wanting to insure her
diamond engagement ring would obtain an endorsement to
her homeowners' policy in order to prove not only that she
owned the ring, but also its value. She would do this by
obtaining a formal appraisal of the ring from a jeweler, and
then sending the appraisal to the insurance carrier for
special notation on the insurance contract. Formal
endorsements such as these will help in the claims process
and ensure that the homeowner gets the full dollar value of
the item if it is lost, stolen or damaged in a disaster. Typical
items that are endorsed in addition to jewelry include furs,
antiques and collectibles.
Wrapping It All Up
To avoid any discrepancies and any delays in receiving
your insurance money for your home, make sure you
document everything . Photograph and videotape the entire
contents of your home and the home itself. Then store these
photos and videotapes in a fireproof box. In addition,
consider storing a copy of the photos at a relative's house,
and/or in a safety deposit box. Doing this will help
homeowners compile an inventory of their possessions
(which is what the insurance company will demand) after a
disaster. It will also, by extension, dramatically shorten the
length of the claims process if a disaster does occur.
Homeowners' insurance is a necessity. There are ways to
save money, but there are also some features that
homeowners shouldn't skimp on. Make sure you know the
difference.
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