Buying a house is a dream come true for most people. And yet, not all homeowners understand the importance of home insurance in safeguarding their home sweet home. If you are a first-time homebuyer, you are bound to make some mistakes while selecting your home insurance coverage. Here are a few things to look into before you zero-in on the perfect insurance coverage for your home:
Evaluate your needs depending on the type of your home. The insurance needs of a condo are different than the ones required for a house. If you buy a condo, you only need the home insurance to cover the interiors of the condo; things like walls, ceilings, floors, appliances, and other belongings present inside the unit. Damages to exterior walls, lobby, elevator, building structure, etc. are covered by the homeowner associations’ insurance. However, when you buy a house, you need to look for insurance that covers the interiors as well as the exteriors of the house including the garage, garden, backyard, and the land on which your house is built. A house owner also needs to consider the rebuilding cost in case of terrible damages to the house. Thus, you need higher insurance coverage if you own a house as compared to the coverage needed for a condo.
Know your claims under basic and comprehensive coverage. Homeowners are often unaware of the various damages that they can claim for depending on the home insurance policy they have chosen. If you opt for basic insurance coverage, it only covers you from fire and electrical damages. You can’t claim for losses incurred due to robbery, wear and tear of the building structure, etc. But if you select comprehensive insurance coverage, it covers all the items in the house from any kind of damages. You can even claim for freezer contents, garden refurbishment, home renovations, water leaks, and more. Some insurance policies cover your stay at hotels if the damage has made the house uninhabitable. Even though you would need to pay higher monthly premiums, comprehensive insurance ensures all-round protection of your house.
Never underestimate the value of your homes contents. A home can hold many valuable items like furniture, electrical appliances, jewelry, laptops, phones, etc. If they are damaged or stolen, it could leave a deep hole in the pocket. Therefore, it’s advisable to include the net worth of household contents while deciding the claim coverage. Often, homeowners underestimate the cost of these items which leads to lesser claim coverage. So, when the damage occurs to the valuable contents of the house, the homeowners incur losses as they can only claim for a lesser amount. Before you decide on the coverage amount, make a list of all the items along with their accurate financial worth to avoid confusion.
Beware of steep increase in annual rates. Since the cost of rebuilding a house rises every year, many home insurance policies increase their premium rates annually. Stay away from insurance providers that increase their rates drastically.
Choose deductible amount wisely. One of the key factors that directly impacts your insurance premium is the deductible amount. It is the amount that you have agreed to pay from your pocket while submitting your claim to the insurance company. For example, if your deductible is $500, and your claim is $2500, then the insurance provider will disburse only $2000 to cover your damages. The higher the deductible amount, the lower will be the monthly premium and vice versa. It is not advisable to select a high deductible amount for reducing the monthly premiums, as you will have to pay a large amount while claiming for damages. So always think twice before you select your deductible amount.
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