LOCK UP YOUR INSURANCE BEFORE YOUR NEED IT

Many First Time Home Buyers and current Home Owners are not aware of  the many insurance needs in which th

ey may need, in my opinion they are in a rush and caught up in the moment of getting their New Home and closing it. This information is to 

hopefully cause pause and help Home Buyers really break down what they may need 

before something occurs that may have made them wish to do more homework on their insurance needs. Hope this helps.

When you are ready to purchase homeowners insurance for your next home, it’s important to understand what, exactly, you should insure. There are two distinct categories of property: the structure of your home and your personal belongings.

Home Structure
According to the Insurance Information Institute (III), you can insure your home’s structure in three different ways:

Replacement cost: This insurance pays the policyholder cost of replacing the damaged property without deduction for depreciation, but limited to a maximum dollar amount.

Extended replacement cost: Covers costs over the standard limit, giving you protection against a sudden increase in construction costs due to a shortage of building materials, for example.

Actual cash value: The policyholder receives an amount equal to the replacement value of damaged property minus an allowance for depreciation. Unless a homeowner’s policy specifies a property is covered for its replacement value, coverage is typically for actual cash value.

Many homeowners fail to consider the numerous factors that contribute to replacement costs. They include:

• Local construction costs
• The square footage of the structure
• The type of exterior wall construction — frame, masonry (brick or stone) or veneer
• The home style (ranch, colonial, etc.)
• Number of bathrooms, bedrooms, etc.
• Type of roof (shingle, slate, shake)
• Extras, such as attached garages, fireplaces, box windows, etc.

As the cost of construction increases in your area, be sure to review your policy to keep up with this inflation. Some insurance companies even offer an “Inflation Guard Clause,” which automatically adjusts your policy to compensate for inflation when the policy renews each year.

Also consider that revised building codes may affect your replacement cost if you ever have to rebuild. For instance, a less-expensive building material used in the original construction may no longer be allowed — thereby increasing your rebuilding expense.

Personal Belongings
For your personal belongings, you may purchase replacement-cost or actual-cash-value coverage. Most plans provide for actual cash value.

Inventory everything you own, so you can consider the coverage limits on individualitems, such as jewelry, silverware, furs and computer equipment. If the limits are too low, consider a special personal property “endorsement” or “floater,” which allows you to insure valuables separately.

The most common homeowner’s policy is called a Homeowners-3 (HO-3) policy. It covers your belongings for loss due to fire, lightning, tornadoes, wind storms, hail, explosions, smoke, vandalism and theft.

Water damage caused by the accidental discharge of water from a plumbing system is usually covered by your homeowner’s policy, but you might notice that there is no coverage in a homeowner’s policy for flooding. Flood insurance is provided by a program of the Federal Insurance Administration.

An HO-3 plan covers personal property even if you take it with you on vacation. If your golf clubs are stolen while you’re visiting relatives, they typically are covered for their current value.

Other items an HO-3 policy covers include:

Medical expenses: Your plan should cover liability for a person’s injury on your property — including the legal expenses to defend you against a lawsuit (even if you are negligent). Medical payments arising from the injury are also covered, but check to see how much liability protection you’re carrying. The standard amount is $100,000.

Acts of God: If a storm causes a tree to fall on your property, your insurance will probably cover the damage — but not the removal of the tree. Trees and shrubs in your yard are typically covered from risks like vandalism, theft and fire — but not wind damage. Insurance also covers natural disasters such as hurricanes and tornadoes, but doesn’t cover floods and earthquakes.