Homeowner's Insurance 101

When considering insurance policies and or agents, be sure you are comparing apples to apples. Sometimes the most important factor is not which is cheapest, because cheaper is not necessarily better. Comparing my fee to that of a cheaper lawyer is like comparing a $9.95 Sizzler Steak to one from Morton's at $49.95. They are both called steaks but one might be better than the other.

Many homeowners do not compare homeowners insurance (HO) products and often pay too much or receive too little in coverage. That could mean they are not able to rebuild their home in a catastrophe or they do not cover their furniture and jewelry for the correct replacement value.

Like many of my readers, I have a tendency to purchase all my insurance from one agent because I trust him. However there is no guarantee that your agent has your best interest in mind. Will they share the cheapest product with you or is the agent more interested in selling you the product for which they make the biggest commission?

It should be possible to strike a balance between buying adequate insurance to protect your biggest asset (your home) versus keeping the costs in check. Before you buy homeowners insurance consider the following points:

Understand how a homeowners policy works. With a home there are 3 important areas of coverage. The home itself, the things inside it and liability coverage to protect you should someone be injured by a fall or dog bite on your property.

Your mortgage company will require insurance to cover rebuilding the home, not the land. This is the most expensive aspect of this insurance and the part that should be reviewed regularly...especially if the price of construction is going up dramatically.

The part protecting personal belongings is the trickiest part. There are caps on coverage if you do not get a rider for jewelry, stamps, coins and firearms. Obviously the less coverage you get the less the cost of the policy........just like auto insurance. Likewise the higher the deductible the more you will save.

As a lawyer, liability is most important part and the part I am most concerned is adequate. This cover an injury on your property be it a slip and fall, golf cart accident or dog bite.

Your coverage is dependent on the amount of coverage you purchase and how you structure it. For instance instead of a $5M policy consider a $1M policy and $4M Umbrella. This also works for auto insurance. It is much cheaper to purchase the umbrella than purchasing one policy with high limits.

I suggest clients video tape their belongings so they can prove what was destroyed by fire, flood, etc. Start the video by holding the days local paper. This is consistent with the admonition I give clients "people don't plan to fail, they fail to plan".

Also consider checking the complaints made against the insurance co and whether they have a history of not paying and just taking your money. You can run a civil index on the company to see who sued them and who they sued.

To save money you can purchase a higher deductible to lower your coverage costs. A deductible is the amount you have to pay before the insurance kicks for payment of a claim.


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