Homeowner’s insurance can be a tricky and confusing purchase, especially if you’re buying your first home. Trying to understand all the policy rules and coverage can be hard to take in, and—since you’ve likely never had a disaster involving your home—you may not even know what you need to look for. The multitude of insurance companies doesn’t help. Determining a good one, like TrustATrader Insurance for example, to a bad one, is a tough task.
However, there are a few things you should always look for and ask about when buying home insurance. Here are a handful of things to think about when you are deciding to buy.
1) Replacement value
Many insurance policies say that they will replace your home and possessions in the event of an emergency, but you need to find out if they will pay fair market value for your lost possessions or if they will pay replacement value. Fair market value simply means that they will give you the amount of money that item would sell for on the open market. So, if you bought a $2000 computer that was damaged in a fire, they may only pay you $800 for it because that what you could sell it for. Replacement value—on the other hand—pays to replace the exact items you lost. That means you can get the same computer you lost.
2) Claim payment
Ask about how you will be paid for damaged and lost items. Will the insurance company give you a check and let you replace your items, or will they wait until you buy new items then reimburse you for the cost? If you are low on cash after a disaster, this could make a big difference.
Some insurance plans do not cover the cost of inflation on your home. If you built a house 10 years ago, it is likely that same house will cost more to build today. If your insurance company will not compensate for inflation, you might have a problem.
4) Disaster insurance
Although many home insurance claims will cover events like a fire, they probably will not cover your home in the even of an earthquake or flood. If you live in an area that is likely to be hit by flood or earthquake, make sure you talk to your insurance agent about covering those events.
5) Umbrella policy
Most home insurance policies will contain liability insurance in the event that someone harms themselves on your property. Most home insurance policies will cover a few hundred thousand dollars, but most liability claims today start at $1 million. An umbrella policy will help you increase your liability coverage in the event you are sued.