Home insurance plans tend to get ignored until they’re needed, and that can be a costly mistake for homeowners.
“Most homes in the U.S. are underinsured, and it gets worse if you’ve renovated or upgraded your home,” says Mary Boyd, division president at ACE Private Risk Services.
Home insurance will help protect your finances in the wake of a natural catastrophe, accident or unexpected event that damages or destroys your home. Being properly insured and knowing the value of the home and your possessions can provide some peace of mind during a stressful period.
“People will insure for what they think their outstanding mortgage amount versus what their home costs. They need enough insurance to rebuild in case there’s a fire or a flood,” says Boyd.
Experts suggest reviewing your policy annually, as well as after major life events like getting married, starting a family, buying a second home or entering retirement. Most insurance providers send an annual renewal packet with a declaration page outlining your coverages to make the review process easier.
Most homeowner’s policies cover the house itself (the structure), the contents inside, and liability if you get sued because someone had an injury in your house.
“When you think of those three coverages, you want to make sure that you’d be put back in the same position if you suffered a loss,” says Kevin Noles, product manager at USAA. “If you had to rebuild your house because of a fire or otherwise, you want to make sure you have full replacement cost coverage for your house.”
You should also feel comfortable with the cost of your plan and its coverage. “Your insurance company can explain what coverage you have and that you have the right balance between a high enough deductible to save you money and low enough that you’ve the money to pay your deductible,” Noles says. Also be sure you’re getting all available discounts for having alarms, not submitting any claims and buying other insurance products from the same carrier.
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