Dont Neglect Your Homeowners Insurance Policy
Homeowner’s insurance is something that every homeowner must have in place, and is usually regulated by law. Normally you can not even close on a new house without first having the premiums for the first year paid and up-to-date.
But many people neglect to realize the importance of their homeowner’s insurance policy, which could end up costing them thousands upon thousands of dollars in the long run.
Whether you have lived in your home for 15 years and have not looked at your policy since the day you bought your house, or are about to close on a brand new home next week; be sure that you take the time to carefully review and understand your homeowner’s insurance policy.
A recent article on about.com by Bobbie Sage, “Making sure you have enough homeowner’s insurance,” discusses the importance of taking a careful look at your policy and what is included in its coverage.
The first thing you must look at is the type of policy you have in place, since there are normally two main types of homeowner’s insurance policies.
“The main determining factor is whether your policy is a replacement cost value policy or an actual cash value policy. Actual cash value is also known as the fair market value. Fair market value is basically the amount that a buyer would pay for your home.”
A replacement cost value policy is generally better, especially if you live in an area that is prone to fires, hurricanes or anything else that could potentially destroy your home. Of course, there are variations of this type of policy, and you can pick one that best suits your individual needs.
“With a replacement cost policy, the chances that you will be able to completely rebuild your home are better. But, there are many types of replacement cost policies, so you need to be careful to purchase a replacement cost policy that best meets your needs. One example is a guaranteed replacement cost policy. This type of policy is the only one that will pay to completely rebuild your home.”
It is essential that you review your homeowner’s insurance policy at least once a year because rules, regulations and codes are always changing and could have some negative repercussion if something happens to your home and the policy is not up-to-date with the codes.
“Don't forget about building code upgrades coverage. Cities and counties periodically change their building codes. If you don't have this coverage, and you need to change the structure of your home to keep it current with building codes then your insurance company may not pay for changes.”
As you can see, just by making a few changes to your policy can end up saving you a lot of money should the unthinkable happen to your home. Another thing to consider is not just going with the cheapest coverage, because it may not be as good.
“When shopping for home owners insurance policy you may not end up with the best coverage if you only shop by comparing prices and not by comparing coverage. Your home is one of the most important purchases you will make. Take the time to understand your insurance before you purchase it. It is one of the best decisions you make for yourself and your family.”