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Home Insurance: Which Answers to Insist On

by Judy Camp

Home insurance is going to be a necessity any time you buy a home and have it financed. Insurance coverage is designed to protect the homeowner in case of emergency. Your mortgage lender will require the insurance policy to protect their investment, but it is important to have it even if your house is paid in full, as a protection of your investment in your home and possessions. The ability to file a claim could mean losing--or keeping--your life savings. Here are some tips to help you when shopping for homeowner insurance...

1. Comparison shop
Go to several potential insurers, and ask them to quote you. Try to look for companies that have been in business awhile, and continue to be strong. You may need your insurance 10 or more years from now, and you will want the company to be there for you. Have a few companies quote you, and compare prices.

2. Ask about future claims
Price isn't the only factor you can use to determine your choice of insurers. Be sure to ask how claims are handled. If and when you file a claim, find out if you will receive your entire claim upfront, or just a portion. Will the insurance company pay you for everything you've lost, or only those things that you replace?

You may find out some insurers will give you the cash value of your possessions immediately after a loss, but won't pay you the replacement value until after you've actually replaced your items -- and have the receipts to prove it. This could be a problem if you're wiped out and have no cash reserves.

Also, ask how quickly you will need to replace your belongings. There may be times when you will want to wait months to replace many items, such as in the case of a fire. Until your home is rebuilt, you won't want to buy a new bed, for example. Find out how much time you will have to replace your belongings with each insurance policy before agreeing to one.

3. Consider your individual needs
Different houses, and different locations, can drastically change your insurance needs, and your rates. Factors to consider include the age and structural integrity of your home, whether you live in a flood plain or high crime area, how close the nearest fire station is to the home, the rates for rebuilding in your area, the worth of your home, etc.

4. Replacement value
Make sure you get quotes on replacement value, at least 80%. Some homeowner insurance policies only cover market value, which means the company will only pay for what your item would sell for, which is usually much less than the cost to buy the item new. Stay away, especially, from any policy that limits your coverage to the amount you owe on your mortgage.

5. Take inventory
Long before you have a need to file a claim, take inventory of your belongings. A video camera is your best bet. Rent one if necessary. Walk around to every room, and open cabinets and drawers. Don't forget the garage, shed, offsite storage, etc. Keep your video and copies of some of your largest receipts, along with a copy of your home owner insurance policy, in safe deposit box.

6. How can you save money on insurance?
Consider a higher deductible, if you would like to save money on insurance payments. Your deductible can range from $250 to $5000, generally. Try to keep it as high as you could afford, if tragedy were to strike.

You can also save money on insurance by choosing the right type of home. Newer homes are normally more structurally sound than older homes. As for the exterior of your home, you will have to consider the area. In an earthquake-prone area, such as California, frame houses are best, while in the Midwest, with its tornadoes, a brick house is more sturdy. When shopping for homes, avoid flood plains or hurricane-prone areas.

Don't allow the agent to include your land value in your insurance quote. For most disasters, such as fire, theft, etc. the land itself is undamaged, so it isn't necessary to include the value of the land in the quote.

The addition of a burglar alarm or other security measures could mean a reduction in the cost of your policy.

7. Review your insurance policy every few years
Circumstances change, and a review of your homeowner's policy every few years will help you retain adequate coverage. When reviewing, consider the following:
* Have people moved in or out of the house? If you have gotten married or divorces, or your children have moved out of the house, you r coverage should be reassessed. You need to have an accurate inventory of the possessions in the home.
* Have home prices changed in your area? Just ten years ago, the price of a new single family home averaged nearly $50,000 less than today's average. If an emergency occurs, you may not have enough coverage to rebuild the same house.

You may also have made changes that will affect the cost of insurance, and may now save you money. If you have had a burglar alarm installed, especially one that reports to a central station, your premiums could go down.

You should also keep a current copy of your possessions in a safe deposit box. Review the list once a year or so. If you have sold or donated some expensive items, your premiums could be affected. On the other hand, if you purchased some expensive items, you will want to make certain they are covered.

8. Consider additional coverage
If necessary, buy additional coverage for items not adequately covered in your homeowner policy, such as expensive jewelry, computer equipment, or artwork.

Your home, its contents, and other structures are normally covered by a home insurance policy coverage against--
* Theft
* Vandalism and malicious mischief
* Fire or lightning
* Smoke
* Windstorm or hail
* Breakage of glass
* Explosion
* Riot or civil commotion
* Vehicle damage or theft

Your policy normally also covers loss of use, including increases in living expenses due to a fire or other insured loss. Your policy should also include liability coverage, which protects you for injuries or damages to others caused by you, a member of your family or a pet. Medical payments insurance covers medical expenses to non-family members injured at your home.

Depending on where you live, you may decide to purchase additional coverage for other potential losses, such as earthquake, flood, earth movement and "wear and tear".

Judy Camp is a writer for . Read more articles on home and garden topics in the Home Style News email newsletter. Subscribe free at

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