6 Things to Consider When Buying Homeowner’s Insurance
Your home is one of your biggest and most important investments. When choosing a homeowner’s insurance policy, you’ll want to have the perfect combination of coverage, quality, reliability, and price. Here are 6 things to consider when purchasing homeowner’s insurance.
Does it include a cosmetic damage clause?
If you live in an area prone to high winds or hailstorms, choose your homeowners insurance policy carefully. With the rise in frequency and intensity of extreme weather events, insurance companies have started to adopt cosmetic exclusions. With a cosmetic damage exclusion, your insurance company may not cover hail or wind damage that affects the appearance, but not the function, of your roof.
Is it an ACV vs RCV policy?
It’s really important to your pocketbook to know whether the policy is an ACV (actual cash value) or RCV (replacement cost value) policy. If your roof is damaged, ACV policies will only pay for a portion of the repairs. In fact, ACV payments are calculated based on the remaining lifespan of an item after a reduction of depreciation is made. For example, an asphalt shingle roof with an estimated lifespan of 20 years would be depreciated by 50% after 10 years. Therefore, if the replacement cost of that roof while it was new was $400 per square, it would have an ACV value of $200 after a 50% reduction of depreciation. RCV policies, on the other hand, will cover 100% of the replacement cost of a product with no depreciation reductions. The insurance claim will still show the ACV and RCV differences and the payments to you from the claim amount will be separated with the ACV total being paid up front and the remainder paid once the work is complete.
How big is your deductible?
Your homeowner’s insurance policy will have one of two types of deductibles: A standard dollar amount deductible or one based on a percentage of your home’s value. Standard dollar amount deductibles usually range from $500 to $2000. So, if your home becomes damaged, you can expect to pay this specified amount out of pocket when filing a claim. Most percentage-based deductibles are around 1%-10% of your home’s insured value. It may be tempting to save on your insurance premium by choosing a larger deductible, but this can be risky, especially if you have a percentage-based deductible. For example, if your home is insured for $300,000, and your deductible is 2% of your home’s insured value, you can expect to pay $6,000 per claim. That might be more than the damage to your home in some cases.
How does the insurance company rate in consumer reports? Do they have good reviews?
Quality, price, and the availability of dependable customer service are just a few things you should consider when choosing an insurance company. To find the best insurance companies, do your research online. A quick web search can help you find honest customer reviews and consumer reports. Also, be sure to ask for referrals from people you trust. For more tips on how to do your own research, check out this article: https://www.dummies.com/personal-finance/insurance/how-to-evaluate-insurance-quality/
Does the insurance company offer multi-line discounts?
Multi-line discounts reduce your rates if you choose to buy multiple types of insurance from the same company. It’s a good idea to keep this in mind when shopping for homeowner’s insurance. Adding your car insurance or other item coverage to your policy can save you money.
Does your policy include code upgrade coverage?
Home building techniques and building codes constantly change. If your roof must be rebuilt after a hailstorm, for example, your roofer will have to meet current building codes. Even if your home was built during a time when the codes were different, code updates still apply. Without code upgrade coverage, the cost of these upgrades could come out of pocket. Depending on what work is needed to bring your home up to current code, these upgrades can be costly. Talk to your agent about code upgrade coverage and gather information about what will and will not be covered. This can save you from dealing with expensive surprises in the future.
Before you purchase a homeowner’s insurance policy, do your research. It can help you avoid high deductibles and out-of-pocket costs in the event that you must file an insurance claim. For more information, take a look at our homeowner’s insurance claims page. We’re hail claim experts. Give us a call at (719) 487-7663 today for more information.
