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How to Insure Your Home

When you’re in the process of buying your first home, you will experience both excitement and fright.  Another issue that adds to the anxiety of homeowners is having to purchase home insurance.  To most people the word “insurance” is a foreign language.  Here are a few tips that will help you insure your home adequately:

Replacement cost coverage in lieu of market value

Most people mistakenly believe that they only need to insure their home for the market value of the house. The problem with this is that if the house burns down to the ground and you need to rebuild, market value will not be enough to rebuild the house.  The market value is the cost of the home on the market, and not the cost to rebuild one.

Insuring your home for the replacement cost will give you enough to rebuild the home.  This is because there are additional costs associated with rebuilding your home.  They include: an engineer to design it, contractor expenses, and material expenses. So, why is insuring my home more than what I paid the builder for my home?  When you think in terms of homebuilders building a subdivision, the builders are able to budget to build multiple homes while saving money.  You, on the other hand, will not get to experience the same savings that a builder does when you rebuild your home.

Cover your contents

Make sure you take time to calculate the exact replacement cost of your personal belongings.  If you don’t set the limit of the actual replacement cost on your contents, the percentage of the home value which is automatically given to contents coverage may be insufficient.

Equipment breakdown

Make sure that you include equipment breakdown coverage in your policy.  This coverage is important because it will replace an air conditioner, if it’s struck by lightning and goes out. A homeowner’s policy has so many things that are excluded.  By adding the equipment breakdown endorsement you add coverage that will get around some of these exclusions.

Schedule special items

Items that are not covered by the content section of the policy are: jewelry, furs, silverware, china, oriental rugs, and musical instruments.  These types of items have to be specifically named and they are covered by an inland marine coverage form that is either attached to your policy, or written as a separate policy.

Personal liability insurance

Personal liability is a section of the homeowner’s policy, which protects you from personal liabilities.  For example, when someone slips and hurts themselves in your home, it’s the liability section of the homeowner’s policy that will provide the coverage.  It’s important to request the highest limit of liability available.

Uninsurable risks

When shopping for your homeowner’s policy, let the insurance agent know if you have a swimming pool or trampoline.  There are some insurance companies that will not provide coverage for these types of risks.  You don’t want to find out that you have an exclusion for one of these items at the time of a claim.  Yet another issue, is certain types of dog breeds, which are not insurable.

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