If your home goes up in flames, the last thought you want to go through your mind is: “I should’ve had more insurance.” Reading and hearing home insurance issues in preparation for this article has made me more aware that we probably need more coverage than we have. Here are a few things I’ve learned along the way, and I’m looking forward to any stories out there of those of you who’ve been through a home disaster.
How much homeowners insurance should I carry?
For the longest time, I thought that we should only carry what we deemed to be appropriate when weighed against risk. Now, I’m leaning on the side of taking the ultimate precaution: covering your home up to the value of it. It is very possible for a home to burn down fully; what makes some people think that it can’t happen to them? Of course it can!
Losing your home in a fire can utterly destroy your financial future if you don’t have insurance to protect it. Think about it! Your home is probably the most expensive investment you have. Losing your home can set you back decades. You don’t want that to happen to you!
How high should my deductible be?
That depends on what you can afford. If you have an emergency fund of 3 to 6 months of expenses in the bank, consider a higher deductible. You’ll save some money on the premium. If you don’t have an emergency fund of sufficient nature, lower your deductible. You also may want to lower your deductible if you can find good value in doing so.
What should I avoid when shopping for homeowners insurance?
First, avoid policies that don’t guarantee complete replacement cost. Although the premiums are more expensive, you won’t have to remember to increase your insurance year over year as the value of your home goes up. Modern homeowners insurance policies only cover up to a specified amount of the policy plus, say, 20%. For example, if you buy a home at $100,000 and have $100,000 of coverage, your policy will only cover you up to $120,000. Let’s say that in 7 years your home is valued at $150,000. If it were to burn down, you would be covered up to $120,000, not $150,000, resulting in a loss of $30,000.
Again, avoid underinsuring. Your homeowners insurance is perhaps one of the most important pieces of insurance you can carry. You don’t want to lose your hard-earned dollars to a catastrophe.
What if I’m renting?
In that case, your landlord should have homeowners insurance. You would be responsible for insuring any valuables on the property. I have heard first hand of tenants losing electronics and jewelry from theft. Don’t be disillusioned. Your landlord probably isn’t insuring your valuables. You need to make sure that you have these things covered if they are of value to you.
Homeowners and renters insurance is very affordable. Build it into your budget and make sure you are completely covered when it comes to your home and property.
“Insurance Essentials: Homeowners or Renters Insurance” is part of a series on Insurance Essentials: An Introduction To Insurance You Need! I encourage you to read more articles on insurance. I’d also appreciate your comments below so that I might improve this article accordingly. Thank you for your help!
! John wrote two articles for the book: "Budgeting for Groceries" and "How Grocery Stores Work."
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