Jun. 28, 2008 - 8 Tips on Homeowners Insurance

When purchasing a home you will be required to show proof that you have homeowners insurance, also commonly called hazard insurance or home insurance. In fact, all lenders will require a policy to be in force prior to funding the loan.

The most commonly written policy, the HO-3, is designed to cover all aspects of the home, structure, its contents, loss of its use, loss of personal possessions and liability in the event of an accident.

It's important that your policy specifically names what will -- and what will not -- be paid in the case of various events. Typically, claims due to earthquakes, floods and other natural disasters are excluded (but often available for an additional premium). In addition, you should have your policy updated occasionally to reflect the current value of your property. Following are a few tips.

   1. Don't Wait -- Find out if you have the right type and amount of insurance before something bad happens.
   2. Increase Your Deductible -- Increasing it a little can make a big difference in your premium.
   3. Discounts -- There are dozens available; ask your insurance agent about which ones might apply to you.
   4. Purchase Enough Coverage to Replace What Is Insured -- "Replacement" coverage gives you the money to rebuild your home and replace its contents. An "Actual Cash Value" policy only covers what your property is worth at the time of loss (takes into account depreciation).
   5. Special Coverage -- If you have valuable jewelry, coins, antiques, electronic equipment, etc., you may want to pay a little extra to have it covered.
   6. National Flood Insurance Program -- Homeowners who live in areas prone to flooding should check into this program.
   7. Shop Around -- Get at least three quotes as prices vary.
   8. Choose Your Battles -- Once you have home insurance, be careful about making too many claims. Frequent claim activity can be grounds for non-renewal, so make sure your claims are reasonable.