If you’ve purchased a home, you’ve already gone through a process to obtain homeowner’s insurance. But if you moved quickly on a loan or didn’t sit down with an insurance agent directly to discuss your needs, it may be time to re-evaluate your insurance.
Andy Wood, Vice President of Sales for Lawson Insurance Group, explained that homeowner’s insurance isn’t a cookie cutter, one-size-fits all solution. “Generally, people have kind of the same needs, but it’s not as simple as people think,” he said. “They need to make sure that they have enough coverage.”
Whether you’re considering buying a home or already a homeowner, Wood said it’s always a good idea to assess your needs with an insurance agent to make sure you have the right coverage. Before you begin, here are 4 things to understand about your homeowner’s insurance.
Homeowner’s insurance is required when you buy a home
Homeowner’s insurance protects against loss or damages when the unexpected happens, and it’s required by mortgage companies that a homeowner obtain it.
“If you have a loan on the home, you’re required to have it,” Wood said. “But even if you don’t have a loan on the home, it’s important to have because it’s a financial safety net.”
Mortgage lenders want to know the property is insured and the investment is protected, so typically, they require proof of certain types of coverage before closing. However, Wood said people need to understand why it’s so important.
“It’s a safety net. It’s protection,” he said. He also said it’s why homeowner’s insurance shouldn’t be an afterthought when you’re purchasing a home. “It’s more of a plan. You need someone that you can talk through things with, someone that’s been doing it for a while and who is competent.”
Make sure you have replacement cost insurance
One of the first tips Wood recommends is to make sure you have replacement cost insurance.
“You always want to have replacement costs. That’s not only for your home, that’s for everything inside, too,” he said. “You want to make sure you’ve got that, not only on your dwelling, but on your contents, too. You also need to make sure that the home is insured to value. So, you need to make sure that you have replacement costs, that you have enough insurance in your “piggy bank,” so to speak. You need to make sure that’s sufficient.”
Wood explained that replacement cost insurance provides basic coverage for your home. Some people may choose actual cash value coverage, which tends to be a more affordable option for many homeowners. However, he explained that this type of coverage isn’t as comprehensive as replacement cost coverage, and it takes depreciation of your home into consideration. For example, if your roof is damaged in a storm, actual cash value would evaluate the age of the roof before determining what costs are covered.
Meanwhile, replacement cost insurance is designed to repair or rebuild your home at today’s costs. It’s a higher level of coverage than actual cash value coverage, which is why he recommends it for any homeowner.
Wood also explained that your insurance coverage may look different than the price you paid for the home. “Think about it this way: If the house burns down, the land is still there,” he said. “We’re just making sure the home gets built back exactly the way it was, regardless of what you paid for it.”
Look for gaps in coverage
Wood said it’s important to look for areas where additional coverage may be an important consideration for your needs.
“There are some little odds and ends that might be missed unless you’re working with somebody that is going to take an interest in you and really make sure that they’re going to cover everything,” he said.
As examples, scheduled personal property coverage, an umbrella policy, and water/sewer backup insurance may be a great addition to your policy. These types of coverage aren’t necessarily standard with a homeowner’s policy, but Wood explained that they provide a larger safety net for homeowners. “You have another bucket of money to pull from in case something happens,” he said.
Scheduled personal property increases coverage on more expensive items in your home, such as jewelry and fine artwork. Some of these items may not be fully reimbursed with typical coverage. “On homeowner’s policies, there are sub-limits,” Wood explained. “Certain items will max out, so you want to make sure you have the money.”
An umbrella policy is an additional layer of liability that sits over your home and auto. Similarly, water/sewer backup ensures that insurance will cover damages covered by water or sewer problems caused by clogged or broken pipes.
Wood encouraged homeowners to reassess their needs to make sure these gaps are covered. “We don’t want people lying in bed at night asking, ‘Do I have just enough coverage?’” he said. That’s why it’s important to meet with an agent.
Work with an independent agent you can trust
Wood said all homeowners should make sure they have a good independent agent they can reach out to. If you haven’t previously worked closely with an agent, it’s never too late to sit down and reassess your homeowner’s insurance needs. In fact, he encourages homeowners sit down and map out their coverage needs, much like you would do with a financial planner for your financial needs.
“Gather up all your insurance documents, whatever you’ve got,” he said. “We’re going to look at what you have, we’ll look at what you need. Then we’ll go from there.”
He explained that he believes an agent’s value lies in the relationship they create with their customers. “I have a vested interest in making sure you’re well taken care of, not just now, but for the long term,” he said. “Where my value comes in is when something happens. That’s what I’m here for, is to help you walk that road.”
The Jim Allen Group provides access to information on this blog/website as a public service for educational purposes only. Although reasonable efforts have been made to ensure that all of the information made available is current, accurate, and complete…[read more]