Home Insurance Coverage Considerations
Before you compare homeowners insurance quotes, you must know what to expect. The only way to see if you’re saving is to know your coverage options. You should also see the amount of coverage you’re getting. There may even be additional homeowners insurance costs. Check out these considerations before you can save a dime and get the best home insurance quotes.
Standard home insurance covers replacing and repairing your home. Coverage may include damages from different perils like vandalism, theft, or fire. If someone is injured on your property, your home insurance policy will cover medical costs. There are liability coverage options for when you damage someone else’s property on accident. Your insurance will pay for that, too. Pets are also included in personal liability in case they cause any damage. Liability insurance also comes in handy.
There are instances where you’ll need to purchase add-ons for protection from other damages like earthquakes and flooding. These are not included in a standard policy. If you need to cover pricier personal belongings, there are coverage options for personal property coverages, too.
Amount of Coverage
Liability coverage: Figuring out the amount of coverage you need can be overwhelming. However, most homeowners insurance policies set a minimum for liability coverage. In this case, you know your coverage options. It’s typical for homeowners insurance policies to have $100,000 as a specified minimum in liability coverage. Liability coverage can be the most important part of your purchase, so it’s quite common to purchase anywhere from $300,000 to $500,000 in coverage.
Deductible: Your deductible is the amount paid out of pocket if you make a claim. Standard homeowners policies have a flat deductible of $1,000, but $500 and $2,000 are also common. With a higher deductible, you will save more on your overall premium.
Personal possessions: Your homeowners insurance policy will likely provide coverage for your belongings. The amount of personal belongings coverage is usually anywhere from 50 to 70 percent of the value of your home. It’s wise to conduct a personal inventory of your belongings. Find their fair market value to have a convenient record and to see whether you need extra coverage. It’s always wise to check the coverage limits for individual expensive items. Jewelry and musical instruments should be noted. That way, you will know to purchase additional coverage. Most people buy a floater or an endorsement to insure these expensive items individually.
Replacement Cost vs. Actual Cash Value
Going with the right policy makes a world of difference. You may get caught up deciding if you should cover your home with replacement cost or actual cash value coverage. When or if something happens to your home, homeowners insurance companies will base your payout on local labor, building materials, additions to your home, the age of your home, and other factors.
Every payout is different. Everything from your home’s building materials to the personal belongings inside it can affect the amount. Homeowners insurance coverage will either pay for replacement cost coverage or actual cash value. Replacement cost homeowners insurance covers the full replacement costs of the material or personal items at current prices. Actual cash value will pay for the depreciated value of the items, that is, their original price minus the value lost over time.
The depreciated value is often far less than you expect. Let’s say your $700 TV from five years ago needs to be replaced. Actual cash value means you’ll receive much less than $700 to replace it. Replacement cost is equal to a replacement’s fair market value. It’s always wise to go with replacement cost coverage. Otherwise, you’re losing on replacing your home or the items inside your home.
See More: Replacement Cost vs. Market Value
Additional Living Expenses (ALE)
Additional living expenses, also known as ALE, are living expenses needed in case of emergency. When you and your family are left without anything after a fire or other qualifying event, you will need ALE. Let’s say you have nowhere to live, no kitchen, no bathroom, and so on. ALE coverage reimburses you for the added cost of living without a home. So, if you tend to cook at home and usually spend $500 a month on food for cooking but have no kitchen, ALE will cover the cost of eating out. This is known in the insurance industry as a loss of use. Eating out is more expensive, and you have to feed your entire family. Let’s say these expenses jump to $1,000 a month; you would be reimbursed an extra $500 a month from loss of use.
Additional living expenses on most homeowners insurance policies are calculated from a percentage of your dwelling coverage. Usually, the calculated ALE are between 20 and 30 percent. If you have extended dwelling coverage at 30 percent, your insurance provider will give you $60,000 for loss of use based on standard coverages. You can ask your insurance agent for more ALE. You will require more money if you have a large family and your additional living expenses would be higher in such cases.
Chances are, you will need to insure more than your home. Multi-policy, known as bundling, combines one or more insurance policies, like home and auto insurance. Most popular insurance carriers, like Allstate and State Farm, offer bundling packages. You are at an advantage if you bundle your car insurance or life insurance with your homeowners insurance. Companies often include discounts with these packages. Be sure to look at your current policies to see if there is room to bundle.