Shopping The Best Homeowners Insurance Policy Guide

12 Dec

If you are shopping for a homeowners insurance policy, there are a number of factors that will be consider when setting your premium. Insurer will look at a wide variety of risk factors when setting a premium, everything from your house, personal property, personal risk factors and regional risks will all be taken into account.

Let’s have a quick look at some of the questions you will need to ask yourself as well as other risk factors you will need to consider when shopping for a homeowners policy. 

Questions you need to ask

There are a number of questions you will need the answer to when finding homeowners coverage. 

  • How much would it cost to rebuild your house today?

You can get the answer to this question by contacting a local insurance company or contractor. Ask about the cost per square foot to build a home and then multiply your homes square footage by that number.

  • Consider regional risks, such as flooding or fire?

This factor is harder to put a dollar value on, insurers rate risk differently so it is hard to determine the cost of each of these risks, but your insurance will absolutely be higher if your home is located in an area where numerous risk factors are present.

  • What is the total value of your personal property, excluding vehicles?

Estimate the value of all of your personal property in your home that would have to be replaced if your home was damaged or destroyed by a covered peril. 

  • What is the total value of your at-risk assets if someone were to sue you?

If someone is injured in your home and decides to sue you, all of your assets can be at risk if the legal costs or judgement exceeds the coverage levels on your insurance policy. 

How you answer these questions will help determine what coverages you need and how much insurance you should be carrying which can help determine your premium.

Let’s have a quick look at how to calculate some of these costs.

The replacement cost of your home

This is the cost to rebuild your home if it was completely destroyed by a covered peril. You want to make sure you are carrying enough dwelling coverage to cover this cost. 

In almost all cases, the cost to rebuild is lower than your home’s value. The rebuilding value doesn’t include the cost of the land that your home sits on as it is not damaged and doesn’t need to be replaced. 

As mentioned, check with contractors and local insurers to get the rebuilding cost in your area. It is also possible to hire a professional appraiser that will give you an accurate estimate of the value of your home. 

The nationwide rebuilding average is roughly $150 per square foot, but this cost can vary dramatically by area. Once you have your local number, just multiply your home’s square footage by it to get your rebuilding costs.

Replacement cost of your personal property?

Most homeowner insurance policies have a limit on personal property, usually between 50% and 75% of your dwelling coverage. As an example, if your dwelling coverage limit is $200,000, your personal property coverage would be capped at between $100,000 and $150,000. It is possible to up your coverage limits for an additional premium. 

Personal property includes a wide variety of your possessions, including:

  • Clothing
  • Electronics
  • Computers
  • Kitchen appliances
  • Power tools
  • Furniture

In order to get an accurate estimate for your possessions you should do an inventory of your home. There are numerous apps that make this process a bit easier. When doing an inventory, you should take photos or video of your possessions, as well as an estimate of their worth. 

High-value items may have an additional cap on their value. Most homeowner policies put a cap on high value items such as furs, artwork, jewelry, and other collectibles. The cap will vary by insurer but $1,500 is common. You may need to have an additional rider on the policy that ups the coverage for your high value items. 

Regional risks 

While it is not really possible to calculate how much regional risks will add to your premium, you should be aware of any that are excluded from your coverage or come with an additional deductible. 

In certain areas of the country, wind and hail damage is excluded from homeowner coverage or it comes with a percentage deductible that can really up your costs if you have to make a claim. 

Be aware of any regional risks that are excluded from your policy or that require additional coverages or a percentage deductible. 

Total value of your at-risk assets

When determining how much liability coverage you need to carry you should consider all of your at-risk assets. If you are sued because someone is injured in your home your liability coverage will cover the cost of your legal fees and any judgements up to your coverage limits. This means you need to choose your limits carefully. Consider all of your assets, some items to consider:

  • Boats  
  • Business assets you personally own          
  • Investment real estate          
  • Future wages
  • Money in bank accounts       
  • Investments   
  • Personal belongings

The majority of insurance policies come with at least $100,000 of liability coverage but that amount can be increased to somewhere between $300,000 and $1 million for an additional premium.

If your assets exceed the liability coverage on your policy, you should consider upping your liability limits. 

Once you have answered all of these questions and calculated your homes rebuilding cost and the cost to replace your personal possessions, considered your regional risks as well as  the risk posed to all of your assets you are ready to shop for a new homeowners policy


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