How Much Coverage Do I Need?
Policies are based upon how much it would be to rebuild the house, not the market value. This comes as a shock to some buyers, but the lot value and comparable market value is not taken into consideration. This policy only takes into consideration what it would take to rebuild a home comparable to the existing home.
Deductibles
Typically, the lower the deductible, the higher the rate of coverage per month. Dependent on each specific situation, it may benefit homeowners to carry a higher deductible and save monthly. If the family has savings that they can use for minor issues (ex. Sink floods and ruins cabinets near sink) then it can be a great cost-savings in the long run. Carrying a $2500 coverage versus a $500 coverage can save thousands of dollars of the next 30 years.
Additional Coverage
Although homeowners policies cover many issues that may occur with the home, there are some possessions and disasters that are not always coverage by a broad homeowners policy.
- Jewelry & Possessions: Many policies only cover jewelry or possessions in value up to $2,000-$3,000. In many cases, this does not come close to covering the replacement value of precious items. Add a jewelry & possessions rider to your policy or sign up for a separate policy with your insurance company to ensure that these items can be replace in full.
Flood & Earthquake Insurance: Most homeowners policies do not cover flooding or earthquakes, so this is typically an additional insurance to be purchased. Depending on where the home is located, the mortgage company may require the homeowner to purchase flood insurance. Flood insurance is available through the National Flood Insurance Program.
