Eight Smart Ways To Insure Your Home Insurance

Eight Smart Ways To Insure Your Home Insurance

Hurricane Katrina swept away all the old rules about homeowners insurance (home insurance). These days, filing a single small claim, switching insurers to save a few bucks, or assuming your coverage hasn't changed can expose you to huge financial hardships.

A study released this week by the Consumer Federation of America supports what many homeowners have been feeling over the past several years: We're paying a lot more to protect our homes and getting a lot less in return. It's more important than ever to check up on your coverage, so here are eight defensive moves to keep you adequately covered and cut costs.

Appraise your coverage
Surveys show that more than half of U.S. homes are underinsured by an average of 22%. Coverage based on generic formulas ($65 to $150 per square foot) won't cut it if you've renovated or failed to account for rising building costs. For $7.95, accucoverage.com will calculate your home's replacement costs.
Story continues below ↓advertisement

Also missing from many policies are flood insurance (assess risk and find providers at floodsmart.gov), sewage backup coverage, and adequate liability coverage, which run as little as $250, $50, and $25 a year, respectively, according to Kimberly Lankford's The Insurance Maze.

Do a claims dry-run
If your home were wiped out, could you prove how much any lost, stolen, or destroyed belongings are worth? Just 42% of us have an inventory of our home's contents, according to the Insurance Research Council. Itemizing your assets gives you a running head start if disaster strikes. The Insurance Information Institute's free home inventory software at knowyourstuff.org can help you catalog your possessions room by room and attach photographs and scanned receipts (don't forget the stuff in the garage, basement, and attic).

Fill in the gaps
Note whether you have "cash value" (based on depreciation) or "replacement cost" coverage and consider that most policies cap payouts at 50% of the home's total coverage. "Extended replacement cost" coverage (which pays out about 20% more than a standard policy) and riders for valuables provide a bigger safety net for your belongings.

Keep up appearances
Today's insurers are skittish. Just asking about filing a claim can put your insurability at risk. Avoid the chopping block by paying for claims of $1,000 or less out of pocket, upping your deductible, and buying your home and auto coverage from the same carrier. If insurability is an issue, ask if a few fixes (e.g., replacing a leaky roof or old boiler) will help.

Check your risk reputation

Your premiums and eligibility are based on the five-year claims history in your home and auto insurance files. Your personal claims history and your property's history will be on file if you have one. In some states, your credit history plays a factor in setting rates. ChoicePoint (an Equifax spin-off) is the dominant insurance records bureau. If you have a personal or property claims file (not everyone does), choicetrust.com allows you one free look a year at your C.L.U.E. (Comprehensive Loss Underwriting Exchange) report. So does ISO Insurance's A-PLUS (Automobile-Property Loss Underwriting Service), which shows your car and property claims history through the eyes of an insurance underwriter. (Call 800-709-8842 to see yours for free.) If you really need your insurance score (similar to a FICO score), ChoiceTrust offers home and auto insurance scores for $12.95 each, including an Equifax credit report. Truecredit.com bundles automotive and property scores (based on what's in your TransUnion file and the insurance standards in your state) for just $9.95.

Check up on your insurer
See how it performs under pressure by reviewing the ratings (particularly the "complaint ratio") at naic.org/cis/index.do and ambest.com. Higher-than-average premium hikes and policy cancellation rates are signs that an insurer wants to exit a market. But before you bail...

Rate-shop with care
Switching carriers can cost you more than what you might save on annual premiums. You will give up any good-customer discounts you've earned over the years (typically 5% each year you are claim-free, maxing out at 25% to 35%). Instead...

Cut your existing costs
Three moves can cut your premiums by as much as two-thirds, according to The Insurance Maze: Raise your deductible to $1,000 from $250 (15% to 30% savings), purchase your auto insurance from the same company (15%), and keep a claim-free record (5% to 35%). That would save $245 to $560 on a $700-a-year policy.

If disaster does strike, make sure you have vital information within arm's reach before you head out the door. Preparation can prevent a personal crisis from turning into a financial disaster. Create a command central for your family's finances with this list of bare essentials.

Get It Done: Make a Grab-and-Go Box
Contacts: Note phone, address, and email for family, friends, schools, medical and financial advisors, utilities, and service providers (cleaning, gardening). Designate an out-of-town contact for everyone to call.

ID: Assemble passports, a current picture of each family member, and birth and marriage certificates.

Emergency resources: Include some cash and prepaid phone and charge cards.

Medical: Pull together health insurance policy information; claim forms; copies of insurance cards; a list of hospitals, doctors, pharmacies, and current prescriptions; and medical histories.

Financial: Jot down account numbers (credit, bank, brokerage, mortgage, savings), branch and main websites and phone numbers, and passwords (kept secure). Include the location, spare key, and content list for your safe-deposit box. Make sure a loved one or trusted advisor has been granted access.

Household: Document all payment obligations (mortgage, credit card, utilities, and auto, student, and any other loans), due dates, minimum required payments, and payment info. (Online banking and bill payment is a real help in these situations.)

Insurance: Include homeowners, auto, life, and disability policies; blank claim forms and contact information; a list of local adjusters; and a detailed home inventory.


Legal: Make sure you have included your living will, health-care proxy or medical directive, will, durable power of attorney, and the deed to the house.

Keep original documents offsite (in a safe-deposit box) and put the copies in a Grab-and-Go Box. Store it in a safe place and tell everyone in the household plus a trusted neighbor or friend where it is.

Dayana Yochim is the consumer finance expert at The Motley Fool, a financial services company. For more tips on insurance and other personal finance issues, visit The Motley Fool.

Home Insurance Tips For Valuable Property

Home Insurance Tips

Brits need to follow important home insurance tips when looking to protect their most valuable property. Finding the right cover at the right price is as important to a home buyer as getting a good deal on the purchase of the property. Many home owners learn the hard way that cutting corner on home protection is not a good idea.

Home insurance is vital to providing security and protection for the investment and risk Brits bring to a property purchase. The biggest mistake many Brits make when buying home insurance is cutting corners on premium costs to save a little money. Most lists of home insurance tips begin with making sure to obtain full protection near the top.

Some insurance customers mistakenly believe that insurance protection should cover the current market value of their home. This is not correct. Full insurance cover usually covers a bit more than the current market value of the property. Home insurance is needed to provide for the cost to rebuild or replace damage to the home. Thus, protection should be based on the cost for replacement, including materials and labor. A home that was built using different materials or materials that have increased in cost, would require more money to replace than the existing home cost to build.

Along with providing for replacement of the main building of a property, full cover should also provide protection for out buildings, gardens, or other external property pieces that are important to the property.

The problem for many consumers is that some home insurers, attempting to be helpful, recommend lower cost premium options that save the customer a little money each month, but could potentially cost them thousands of pounds if damage is incurred to the property. A home insurance specialist assists customers by finding protection solutions that provide peace of mind that their full property is protected, while also providing a reasonable cost.

Home insurance should also cover the loss of personal property maintained in the home. Insurers typically ask the customer in an interview for an estimate of the value of personal property. This protection benefit helps cover the personal items that could be lost in a fire, flood, or other disaster.

Other home insurance tips for buyers include finding other customize solutions that might help in a home owner?s particular situation. Many standard insurance plans also provide protection for injury to either residents or guests who might be injured in the home. Especially with homes that have stairs or other potential health hazards, it is important for owners to have protection in the event of liability.

Obtaining adequate home insurance protection is the most important of all home insurance tips. Again, it is more important that a home owner be protected from the potential loss of thousands of pounds from home damage or loss, than it is to save a few pounds each month in insurance premiums by cutting corners. Home insurance is an investment in security and peace of mind. It is an investment in one?s future.

Homeowners Insurance Tips For Homeowners

Homeowners Insurance / home insurance isn't a luxury, it's a necessity. In fact, most mortgage companies won't make a loan or finance a residential real estate transaction unless the buyer provides proof of coverage for the full or fair value of the property (most of the time this is the purchase price). In this article, we'll show you some simple actions you can take to make sure your Homeowners Insurance is sufficient for your needs. (To learn more about insurance, see Understand Your Insurance Contract, Exploring Advanced Insurance Contract Fundamentals and Fifteen Insurance Policies You Don't Need.)

Homeowners Insurance can be very expensive. Those that live in high-risk areas such as close to major waterways, known earthquake fault lines or other high claims areas will pay the most for coverage. In fact, those in high-risk areas are often forced to pay annual premiums in the many thousands of dollars. But even homeowners in relatively sedate, suburban neighborhoods (with property values around the national average of $210,000) could pay between $500 and $1,000 a year for a basic policy.

In Pictures: 10 Insurance Tips For Homeowners

The good news is that although you can't (and shouldn't) avoid purchasing homeowners insurance, there are ways to minimize the cost. (To find out more about homeownership, see A Tax Primer For Homeowners, Fix It And Flip It: The Value of Remodeling and Mortgages: How Much Can You Afford?)

Here are six ways to make sure you get the right coverage and consequent compensation for your home:

1) Maintain a Security System and Smoke Alarms: A burglar alarm that is monitored by a central station, or that is tied directly to a local police station, will help lower the homeowner's annual premiums, perhaps by 5% or more. In order to obtain the discount, the homeowner must typically provide proof of central monitoring in the form of a bill or a contract to the insurance company.

Smoke alarms are another biggie. While standard in most modern houses, installing them in older homes can save the homeowner 10% or more in annual premiums. Of course, even more importantly, in case of fire, they could save your life!

2) Raise Your Deductible: Like health insurance or car insurance, the higher the deductible the homeowner chooses, the lower the annual premiums. However, the problem with selecting a high deductible is that smaller claims/problems such as broken windows or damaged sheetrock from a leaky pipe, which typically will cost only a few hundred dollars to fix, will most likely be absorbed by the homeowner. (To read more about deductibles, see Shopping For Car Insurance, Fighting The High Costs Of Healthcare and Tax Deductions For Rental Property Owners.)

3) Look for Multiple Policy Discounts: Many insurance companies give a discount of 10% or more to their customers that maintain other insurance contracts under the same roof (such as auto or health insurance). Consider obtaining a quote for other types of insurance from the same company that provides your homeowners insurance. You may end up saving on two annual policy premiums.

4) Plan Ahead for Construction: If the homeowner plans to build an addition to the home or another structure adjacent to the home, he or she should consider the materials that will be used. Typically, wood-framed structures (because they are highly flammable) will cost more to insure. Conversely, cement- or steel-framed structures will cost less because it is less likely to succumb to fire or adverse weather conditions.

Another thing that most homeowners should, but often don't, consider is the insurance costs associated with building a swimming pool. In fact, items such as pools and/or other potentially injurious devices (like trampolines) can drive annual homeowners insurance costs up by 10% or more. This may seem like a small price to pay given the joy these items bring, but it is still something that should be considered by the homeowner prior to purchase or construction.

5) Pay Off Your Mortgage: Obviously this is easier said than done, but homeowners that pay off their mortgage debts will most likely see their premiums drop. Why? The simple reason is that the insurance company figures that if you own the home outright, you'll take better care of it.

6) Make Regular Policy Reviews and Comparisons: Investors should, at least once per year, compare the costs of other insurance policies to their own. In addition, they should review their existing policy and make note of any changes that might have occurred that could lower their premiums.

For example, perhaps the homeowner has disassembled the trampoline, paid off the mortgage, installed a burglar alarm or installed a sophisticated sprinkler system inside his or her home. If this is the case, simply notifying the insurance company of the change(s) and providing proofs in the form of pictures and/or receipts could significantly lower insurance premiums.

Look for changes in the neighborhood that could reduce rates as well. For example, the installation of a fire hydrant within 100 feet of the home, or the erection of a fire substation within close proximity to the property may lower the homeowner's annual premiums.

Additional Items
The following are characteristics that all homeowners insurance policies should carry:

* Guaranteed Replacement Value Insurance: All homeowners should buy "guaranteed replacement value" homeowners insurance. This means that their home will be rebuilt in the event of a disaster - no matter what the cost.

Of course, many of you may be thinking that this is what would happen anyway, right? Wrong. Because home values have increased substantially in recent years, it probably costs more to build a house than when you originally purchased your home and your insurance policy. The good news is that guaranteed replacement value policies will absorb the increased costs and provide the homeowner with a cushion if construction prices increase.

* Endorsements: Legally speaking, an endorsement is an amendment to the basic homeowner's policy. Practically speaking, it is a way for homeowners to ensure that their high-priced possessions will be insured in the event of a disaster.

For example, a woman wanting to insure her diamond engagement ring would obtain an endorsement to her homeowners' policy in order to prove not only that she owned the ring, but also its value. She would do this by obtaining a formal appraisal of the ring from a jeweler, and then sending the appraisal to the insurance carrier for special notation on the insurance contract.



Formal endorsements such as these will help in the claims process and ensure that the homeowner gets the full dollar value of the item if it is lost, stolen or damaged in a disaster. Typical items that are endorsed in addition to jewelry include furs, antiques and collectibles.

Wrapping It All Up
To avoid any discrepancies and any delays in receiving your insurance money for your home, make sure you document everything. Photograph and videotape the entire contents of your home and the home itself. Then store these photos and videotapes in a fireproof box. In addition, consider storing a copy of the photos at a relative's house, and/or in a safety deposit box. Doing this will help homeowners compile an inventory of their possessions (which is what the insurance company will demand) after a disaster. It will also, by extension, dramatically shorten the length of the claims process if a disaster does occur.

homeowners insurance is a necessity. There are ways to save money, but there are also some features that homeowners shouldn't skimp on. Make sure you know the difference.