5 Things to Know About Insuring Your Home

Most people who own a home understand the basics of homeowners’ insurance. But sometimes, and this is one of those times, the devil is in the details. Did you know that your coverage can be cancelled for a number of reasons, or that there is a foolproof way to calculate the amount you need? In addition to those two key pieces of knowledge, there are a few more things you should know about homeowners’ insurance.

You Can Calculate the Amount of Basic Amount You Need

How much will it cost to completely replace your home if it’s destroyed by a covered catastrophe? Unless you have engineering or construction expertise, you’ll need to rely on others to come up with this number. First, ask your realtor to calculate the current replacement cost based on recent sales in the area and other data. You can also hire an independent insurance agent to give you an estimate. Finally, use one of the many online calculators to come up with a number. Choose the highest of those three estimates when arriving at a replacement cost, also known as the “dwelling coverage” amount for your home insurance policy.

Your Homeowners’ Policy Can be Cancelled

Your home insurance provider can cancel your policy for a number of reasons and in most cases when coverage is cancelled, it’s because the homeowner has filed too many claims in a short period. Another common reasons for cancellation of a policy: addition of a trampoline or pool, acquiring an especially dangerous pet, missing several premium payments, the policy holder engages in fraud, the owner’s credit or criminal record comes to the attention of the insurers, and more.

Your Lender Can Set the Policy’s Deductible

Your lender has the power to make sure you don’t set your insurance deductible amount too high. As long as you keep deductibles low, you’ll probably get no interference from a lender, but if you try to opt for a big amount, like something in excess of $1,000, you might get a friendly phone call from the lender’s rep, saying, “Hi. You’ll need to set the deductible at $600 or lower.” They can dictate the rules of the game because they have a stake in the house, probably a larger one than you do unless you’ve been in the home more than 10 or 15 years.

Most People Have Homeowners’ Insurance

Even though more than 85 percent of all homeowners in North America have coverage, most jurisdictions do not require, by law, that you have it. However, if you finance instead of buying your home for cash, lenders usually require that you carry a minimum, basic amount of coverage. The current average amount that people pay for their coverage is $1,050 annually.

You Should Meticulously Inventory All Your Belongings

If your policy includes basic coverage for replacement of personal belongings, be sure to take clear, labeled photographs of everything you own and would want reimbursement for. That pretty much means anything valued above $10. Yes, you’ll be taking a LOT of photographs, but it’s well worth the effort in the event of a catastrophe.

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