How much do you know about home insurance? Chances are you might not be as informed as you think you are, especially if you’ve never had to deal with it before. Let’s take a look at some of the basics so that you can make an informed decision about your home insurance policy. First, there are two types of policies to choose from — one-time payments and periodic payments. A one-time payment policy is exactly what it sounds like — it’s just one payment upfront, and then you’re covered for the year until your policy ends or renews.
Home insurance mistakes
When you’re shopping for home insurance, it’s easy to get excited about all of your potential coverage options. For example, if you want to protect your place against weather damage, you can either choose a separate policy or buy a rider—either way, it doesn’t cost extra. But when you’re getting quotes and shopping around, be sure to read everything carefully. Don’t assume coverage is automatically included—and don’t miss out on discounts and other features because of confusion over how a policy works. That’s why we put together our list of common home insurance mistakes so that you won’t have to learn them firsthand.
Do I Need Flood Insurance?
If you live in a flood-prone area, it is probably essential to getting flood insurance. The Federal Emergency Management Agency (FEMA) administers a National Flood Insurance Program that sells policies for up to $250,000 of coverage at more than 21,000 locations. Keep in mind that private insurers can also sell their own versions of flood insurance and may offer lower rates—especially if your home isn’t located in a high-risk area.
How Much Does Homeowners Insurance Cost?
If you live in a low-risk area, your insurance rates will be low. If you live in an area with a lot of home break-ins or natural disasters, your insurance rates are going to be higher. Of course, where you live also affects how much you pay in property taxes and homeowners association fees, which factor into your homeowner’s insurance cost as well.
Which is Cheaper, Renters, or Homeowners Insurance?
Perhaps you’re tired of your apartment, but one of your biggest financial concerns is homeowners insurance. It makes sense: Most renters don’t have to pay for insurance as a part of their rent. With homeowners insurance, however, you’re likely to spend around $800 per year, which is just one more reason to take a hard look at whether or not it’s worth it.
Things to Consider When Buying Homeowners Insurance
Before you enter into a new agreement with an insurance provider, there are a few things to consider. One important thing to look at is your credit history, which can affect how much you pay for your policy. If you have good credit, you may qualify for lower monthly premiums or better coverage options—and if your credit is poor, it could affect how much of a risk the insurer thinks you are.
Understanding the Policy Details of Homeowners Insurance
What homeowners insurance covers varies widely, so make sure you understand exactly what is covered and what isn’t before signing a contract. For example, some companies may require that you to purchase damage caused by mold coverage as an add-on policy if it doesn’t come standard with your contract. Ask questions!
Considering Other Types of Coverage
If you want to be properly covered, your homeowner’s insurance policy should protect against four types of property damage: fire, theft, vandalism, and windstorm. In addition to that basic coverage, you may want additional protection depending on your specific needs. For example, if you live in an area prone to floods or hurricanes and have valuable electronic devices or collectibles in your home.
Here’s an anecdote for you. One of my clients—let’s call him Jimmy—owns a small auto repair shop. Last year, one of his cars was in an accident, and he was looking to purchase a new vehicle. Instead of buying from a dealership, Jimmy opted to buy from one of his customers who had recently purchased a new car.