2torial #0790:
Learn2 Shop for Home Owner's Insurance

Safe at home

As unpleasant as they may be to think about, accidents do happen--houses get robbed, roofs collapse under the weight of snow, visitors slip and fall, and tree branches break windows. Odds are you'll be one of the lucky home owners who only has to file a minor claim once a decade. Still, a good insurance policy can help you feel safe and secure in your own home--and in the event something unexpected does happen, you'll feel better knowing you're covered.

By shopping around and doing some easy preliminary research, you'll increase your chances of finding a policy that provides the greatest security for you and your family. We'll show you what to look for, what to ask, and what to avoid.

Before you decide to purchase anything, research the area where your house is to determine what types of situations you'll have to insure against. For instance, is the house in a neighborhood prone to high rates of vandalism and theft? Have severe weather conditions, like snow and rain storms, hurricanes, or tornadoes, been an issue for your neighbors? How about fires, earthquakes, or mud slides?

Speaking with your neighbors about these things will give you a tremendous jump-start on knowing what type of insurance you'll need to buy--and maybe even how much you'll have to spend.

Estimate replacement costs

To determine how much insurance coverage to buy, you'll need to calculate the replacement costs of your home and personal property. To do this properly, you'll need the help of an appraiser. Here are your options:

A construction contractor. A construction contractor who is familiar with local building costs can inspect your home and assign a replacement value to it. You'll probably get a more reliable estimate from an independent source than from an insurer. Consult 2torial #0506: Hire a Contractor for further details.

Residential property appraisal institutes and organizations. Check in the phone book under "real estate appraisers" for the names and numbers of appraisal institutes and organizations in your area. These are umbrella organizations that provide referrals to pre-approved appraisers in their databases.

A state licensing board. In the U.S., state boards require appraisers to take courses, pass tests, and complete a minimum number of training hours before becoming certified. These governing boards also monitor appraisers and keep records of complaints and disciplinary actions against them. Don't expect a referral, but you can often access their databases to find a list of certified appraisers in your area.

An insurance company. Insurance companies will send their own appraisers. In fact, one way to evaluate an insurance company is to obtain a written estimate from an independent appraiser, and then compare this to the insurer's evaluation. If the insurer's evaluation is substantially lower, consider another company.

Aside from hiring an appraiser, you'll need to prepare an itemized list of personal possessions and their estimated value. This will not only help you decide how much coverage to buy, but it'll also prove to be invaluable evidence if you ever have to negotiate a settlement with an insurance company. The best evidence is photographs, videos, and receipts for your possessions. You can store them in a safe deposit box or in some other secure location away from home.

Understand what's covered

Individual insurance companies tend to have their own names for different packages, and sorting through the various labels can get confusing. However, a shopping list can help you pick and choose more easily. Make sure you're covered for the following:

The house's replacement cost. It's a mistake to only insure your home for the outstanding balance on your mortgage (which is all that's required by most lenders). Instead, insure it for 100 percent of its replacement cost.

In a basic policy, you should be covered for damage resulting from vandalism, theft, explosions, riots and civil commotion, collisions by vehicles and aircraft, glass breakage, surges or shorts in electricity (though radio and television tubes are usually not covered), and problems stemming from improperly functioning plumbing, heating, and air conditioning.

Basic coverage should also include fire and smoke damage, even if a fire started on someone else's property and spread to yours.

The land. The land around your house will probably survive fire, wind, theft, snow, and other situations covered in your policy. So to save on your premium, you needn't include its value when deciding how much coverage to buy. An exception would be if the land is a farm, in which case you'll want farmer's insurance. Also, ask about a separate structure provision in your policy, which should cover fences, sheds, workshops, or other secondary structures.

Personal property. You don't have to provide the insurer with an itemized list of your possessions up front. Usually, personal property is insured for up to a certain percentage of your overall coverage. To fully insure specific items--like jewelry, silverware, stamps, coin collections, and the like--you may have to buy a rider or floater for your policy, which requires that the items be professionally appraised.

Landscaping. If trees, shrubs, lawns, or flowers are damaged due to a peril covered by your policy, you're usually reimbursed for them up to a certain amount. Some policies include a provision covering you if a tree has to be removed because it's either fallen on your home or could potentially cause damage.

Temporary expenses. If damage to your home forces you to live elsewhere while repairs are made, like a hotel or apartment, these living expenses should be covered.

Liability. If someone gets hurt on your property, this covers you.

Business property. Most standard home owner's policies won't cover business property if the home owner conducts a business at home. Ask your insurer about a separate policy (at a separate premium) for home business insurance.

Understand what isn't covered

It's just as important to know what's excluded as it is to know what's covered. Some things that typically aren't covered include:

Flood and/or earthquake damage. If you live in a vulnerable area, speak to your insurance agent about additional coverage.

Windstorm damage. In some geographical areas, where tornadoes and hurricanes commonly occur, the government may offer windstorm policies at lower rates. You can buy them through your insurer.

Snowstorm damage. If you live in an area where there's a threat of damage due to snow, ice, or sleet, talk to your agent about a package that includes these items.

Ask around

You don't want to wait until after a crisis to find out how well your insurer will back up its claims. That's why it's important to check out an insurer's reputation before you buy a policy. Here are some issues to consider:

Customer satisfaction. Check with your local Department of Insurance to find out if the company has a history of consumer complaints. You can also check your local library or search the Internet for information that rates products and services according to customer satisfaction.

Word of mouth. Talk with friends, neighbors, and relatives about their insurers. Also, call the customer service departments of insurers in your area. If you're put on hold for long periods of time, or experience other trouble getting questions answered, this can be an indicator that you'd have similar difficulties after filing a claim.

Financial security. Check with an insurance rating service, which will give each insurer a grade, from "AAA" to "F."

Look out for red flags

After you've compiled a list of insurers, it's time to start asking questions to narrow down your search. Although every home owner will require different coverage, here are some basic concerns:

Do they offer a comprehensive package? This provides the most extensive coverage to home owners, typically including everything except war, floods, and earthquakes. But again, ask a lot of questions to make sure.

Is there a replacement cap? You want unlimited replacement coverage. If an insurer is trying to sell you a policy with a replacement cap, find another agency to insure your home.

Are you covered for the replacement value or the depreciation value? Make sure you get coverage for the amount it would cost to fully rebuild your house after a disaster. Avoid policies that cover only the house's depreciation value, which is the market value at the time of the original appraisal minus the estimated wear and tear since then.

Are you covered for the replacement value of your possessions? Without this, you're only covered for the depreciated value of anything broken or stolen.

Is there an inflation-adjustment provision? This would annually raise your coverage relative to increases in local building costs. Ask about how much this will raise your annual premium.

Are you covered for liability protection? Regardless of who's at fault, this covers you for damage or injury to others while on your property.

Does the policy include an ordinance and law endorsement? This provides coverage for a portion of any costs for upgrading wiring and plumbing to comply with changes in local building codes if you must rebuild all or part of your home.

Get a discount

You may be able to get a lower premium by insuring your home with the same company that handles your automobile policy. To find out about other discounts, ask the insurance agents at the companies you're considering. These may include:

Home security. Most insurance companies will give a small discount if your home has smoke detectors, a burglar alarm, and dead-bolt locks. You may be able to get an even bigger price break by installing alarms that ring directly at the fire or police station.

Identification devices. Mark your television, stereo, microwave, camera, and other valuables with a special tracing device. Insurance companies can provide details about these.

Don't smoke. Your premiums may be reduced if all the residents in your home are nonsmokers.

Group coverage. If you're part of an alumni or business association, you may qualify for a discount.

Loyalty. Some insurance companies give discounts for staying with them for a certain number of years.

Age. If you're over 50, ask about discounts based on age.

Insurance shopping is about hoping for the best while preparing for the worst. By finding a comfortable balance between your needs and your options, you'll be able to relax in your home sweet home.

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