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Home Insurance – Play the “What If” Game

Posted June 29, 2013 | Filed under topic Home Insurance Buying Tips

A home is the largest single investment most people will ever make. Therefore, it only makes sense to insure that investment in the best way possible. There are a number of different types of home insurance including Home Owner, Renter, Condo, and Mobile Home policies.

Home Insurance “What If” Questions:

Perhaps the best way to know if you have adequate home insurance is to ask yourself a series of “what if” questions.

What if the home is destroyed?

If you do not have the home insured for its replacement cost, then anything over and above your coverage is a loss that could take you years to overcome. Replacement cost is not the same as market value, and it is usually lower than the market value.

If you were to have to rebuild your home from scratch, what would it cost? For insurance purposes, most experts recommend insuring it for 125% of that figure. That allows for increases in material, labor, and other costs associated with home construction.

What if personal property is destroyed or lost?

Most home insurance policies cover personal belongings in the amount of 50-75% of the replacement cost of the home. However, there can be things in your home that might require additional coverage. Those are covered by riders, or special endorsements, to the policy. Expensive jewelry, expensive collections, fine art, and other items should be insured with riders. If you are not sure, talk to your agent at the time you are buying your insurance so that you won’t get caught empty-handed later.

What if there are additional living expenses?

If your house is destroyed, where will you live while it is being repaired or replaced? Often, policies provide 20% of your home’s replacement cost to cover those expenses.

What if someone gets hurt on your property?

We live in a litigious society, with many people willing to file a lawsuit at the drop of a hat. It is important to make sure that you have plenty of liability insurance, including enough to cover your legal fees in the event someone gets hurt on your property.

Some home insurance policies cover things away from your home, but it is vital that you know what is covered. Then, hope you never have to find out if something you had not thought of is covered.

What if my home is damaged by a flood?

Most lenders will require flood insurance coverage along with your home insurance if you live in a floodplain, but make sure you know for sure what is not covered just in case. Many insurances do not cover flooding because the government has the National Flood Insurance Program, which determines the coverage and premiums for those areas.

However, federal disaster assistance only kicks in if the President declares a disaster, which only happens about 50% of the time. And, if such assistance is available, it is usually done so only as a loan.

What if I have a business in my home?

It is important that you have business insurance to cover any losses you may incur. That should cover equipment, records and liability at the least. Business insurance is in addition to your regular home insurance policy.

Once you have played the “what if” game, then it is important to compare home insurance companies to see which ones offer the best coverage for the best prices. But if you figure the worst-case scenarios, you should be assured you’ve made the best choice.

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