Homeowner’s insurance 101: what you need to know
Not only is insuring your home required by your lender, but protecting your most valuable asset with adequate insurance coverage is a smart money move. Here’s what you need to know when shopping for homeowner’s insurance:
Interior & exterior home protection: Your homeowner’s policy will include both interior and exterior coverage, but some types of coverage will require extra riders or special coverage and extra premiums (e.g., earthquake, flood, etc.)
Coverage for personal belongings: Your policy should cover clothes, furniture, appliances, electronics and other home contents. Policy limits will apply, and extra riders can typically be purchased for items that exceed standard policy limits. For example, you might want a jewelry rider for pieces that exceed the value of the policy limit. If you have a home office, you might want additional coverage to ensure your computers, mobile devices, equipment, etc. are sufficiently protected.
Personal liability coverage: This covers damage or injuries caused by you or your family, including your pets.
Hotel or home rental: If your home needs to be rebuilt or repaired due to excessive damage, you’ll want a policy that includes the rental of a hotel or another home while yours is out of commission.
Three levels of coverage: There are three types of coverage – actual cash value (value of the home and your belongings minus depreciation), replacement cost (cash value without deducting for depreciation), and guaranteed or extended replacement cost (cost to repair or rebuild your home even if it exceeds policy limits; a ceiling typically applies).
Premiums: Premiums will vary based on the value of your home, policy limits and types of coverage selected, deductible and various risk factors (e.g., home location, credit score, etc.)
Insurance companies: There are many homeowner’s insurance carriers to choose from. In addition to choosing a solid policy at a price you can afford, you also want to choose an insurance company that is financially sound. Check prospective companies’ ratings with firms like A.M. Best, Moody’s and Standard & Poor’s.
Finding an agent: Asking friends and relatives for referrals to a good insurance agent is a great place to start. Keep in mind that some agents only represent one company, like State Farm or Farmers, where other agents are insurance brokers that represent several companies. This could impact the number of options available to you. Once you have found an agent, meet with him or her to discuss your needs and, once you’ve selected a policy, go through it with your agent to be sure that you understand what is included and what is not.
For help finding an insurance company or agent in Washington, visit the Washington State Office of the Insurance Commissioner online. You can also find information about homeowner’s insurance on the site, including information on title insurance, renter’s insurance, floods, landslides, mold and more.