What is Homeowners insurance?
A homeowners insurance policy protects you against unexpected damage to your home or your personal belongings caused by specific events. (Also known as perils) You pay a monthly or an annual premium to the insurance company in exchange for financial protection.
It is important to verify what is covered and what is left out of your specific policy. A standard policy includes things like a loss from fire or smoke, theft, lightning, vandalism, damage from vehicles or aircraft, along with liability coverage if someone was to get injured on your property. Most policies exclude coverage from damage caused by flooding and earthquakes.
What is a deductible?
A deductible is the amount the insured (you) must pay out of pocket before the insurance coverage kicks in. So if you have a $2,500 deductible and a fire causes $6,000 worth of damage you will pay the first $2,500 and the insurance company will pay the remaining $3,500.
What is liability coverage?
Liability insurance provides coverage to a policy owner that is unintentionally responsible for bodily injury or property damage caused to another person. A simple example is if someone slips and falls on your driveway and they sue you for damages. Make sure you have adequate liability insurance on your home along with an umbrella policy for an additional layer of protection.
How to purchase homeowners insurance
Homeowners insurance is a competitive marketplace. Companies are constantly changing prices and offering promotions to entice customers to switch. Add a commission based sales force to the mix and you are constantly bombarded with offers and mailings.
My advice is to build a relationship with an independent broker that is able to shop many different providers. On top of that, you should also call the big players directly to see what they are offering. It is worth the time and effort to shop prices every 1-2 years.
The key to shopping around is making an apple to apple comparison. The amount of coverage, the deductible, the exclusions, liability coverage, personal property coverage, additional living expenses, all these coverages need to be the same when comparing policies.