The Importance of Homeowners Insurance
Recently we talked to Ed Rowin from Farmers Insurance to discuss with us the importance of Homeowner's insurance. Luckily he gave us this great response!
Homeowners insurance is the best product you will ever buy and hope to never use.
What would happen if your home was damaged by fire and all of your possessions were destroyed? If your personal property was stolen or damaged? Did you know that your homeowners insurance covers your possessions even in your automobile? If your automobile is broken into and your belongings are stolen, without a homeowner’s policy your stolen items are not covered. Could you afford to replace everything you own? It can be very expensive and for most of us the answer is "NO". These are a few reasons why homeowners insurance is important!!!
In a person’s lifetime, one of the largest investments ever made is the purchase of a home. Most people work extremely long and hard to save for the American Dream...a home and everything in it. However like anything else in life, your home and personal property are at risk from dangers that are often beyond your control. All your hard work and effort can be wiped away in a moment’s time. Therefore, you want to make sure that you protect your home, personal property and your family from dangers due to an unforeseen event. This a the basic premise of all homeowners insurance...to protect you and your family from loss or damage to your property and its contents, but there are other reasons why having homeowners insurance is important!
Although you may not be able to totally eliminate the risk of unforeseen dangers to your home or property, you can eliminate the financial risks involved by taking out homeowner insurance coverage. A homeowner's insurance policy will provide several different types of coverage’s. There is coverage on the home, your contents, and safeguards you from lawsuits should someone get injured on your property. Homeowners insurance will would pay for the costs to rebuild or repair your property if necessary because of damage by a covered peril. Most homeowners’ policies have coverage for your personal property from theft or damage resulting from a covered peril. It is important to understand your policy as it pertains to personal property. For instance, homeowners’ policies will only cover jewelry, silverware, firearms, etc. up to a certain amount. Any amount over the policy limits will have to be covered with a floater. In addition to protecting your home and possessions from loss or damage, homeowners insurance provides you with liability protection. Liability insurance is one of the most important aspects of your homeowner’s policy. As a general rule $100,000 of liability coverage is standard but can and should be increased for an additional expense. Liability insurance will protect you and your family if somebody becomes injured while on your property. Liability insurance will also cover the legal costs to defend you if you are sued due to an injury on your property. Depending on your policy, there are other expenses that can be covered under your homeowner's policy, such as reimbursement for basic living expenses if your home becomes uninhabitable due to a covered peril.
Most lenders typically require that you have homeowners insurance. Lender’s want to make sure that their investment is protected from loss or damage. It is important to remember that not all disasters are covered under your homeowners insurance. For example here in California, earthquake, floods and landslides are covered by a separate policy that will provide additional coverage specifically for these types of disasters. Coverage’s varies so it is important to know what your homeowner’s policy covers and the limits of the policy.
A common mistake made is the failure to correctly estimate the value of your personal property. I suggest that you create a written itemized inventory of your belongings as well as pictures and/or a video. It is also a good practice to update the inventory every year.
As stated earlier homeowners insurance is a requirement for a lender and the best way to protect your assets. Here are a few ways to cut cost of your homeowners insurance!
Raise your deductible on your policy. Deductibles are the amount of money you have to pay toward a loss before the insurance company starts their claim. Raising the deductible will affect you in the case of a small claim, however your saving over time out way that higher deductible. For example, if you have a $500.00 deductible and you have a loss of $1200.00 you will receive $700.00 from that claim. In the same scenario, if the deductible was $2500.00 you would not receive any money towards the claim, however you might save up to 25% on the yearly cost of the homeowner’s policy.
Don't confuse the purchase cost of the home with rebuilding cost. In most cases the dwelling should not be insured for the purchase price of the home. The land is not at risk of the perils covered in your homeowner’s policy (such as theft, hail, etc.).
Look for discounts that your insurance company provides. This can be anything from combining your policies with the same company, home safety (central alarms, bolting the foundation, etc.), your degree and/or profession and even your age.
As you can see, it is extremely important to have a homeowner’s policy that will protect you and your assets. Without it, you could easily lose your home if disaster strikes.
-Ed Rowin, from Farmer's Insurance, couldn't have broken this down better than anyone we know.
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