Mull This Over: Considerations when Buying a Home Insurance Policy

Sometimes, getting affordable home insurance isn’t the most important thing in the world. Above all else, your home insurance policy needs to be ample enough to leave you in the best possible shape if the unthinkable occurs and you lose your home to a disaster—or suffer serious damage. Sure, affordable home insurance is a great thing and people are always interested in how they can cut down on cost. But when it comes right down to it, the more important questions becomes: can you afford not to have comprehensive coverage? Here are a few things to bear in mind when you’re settling on a home insurance policy.
 

• Is your deductible affordable? Most people don’t count on disaster to occur, so they set the level of their deductible high enough to have a significant counterbalancing effect on their monthly insurance premiums. While this is the advisable thing to do, it’s important to remember not to set your deductible so high that you won’t be able to pay it if a disaster does occur.
   
• Make smart home improvements. If you’re concerned about crime and want to safeguard the contents of your home against possible theft and provide addition protection for your family, having a burglar alarm installed can kill two birds with one stone—and also land you a hefty home insurance discount. However, if you don’t live in an area that’s particularly susceptible to crime and don’t really see a need for an alarm system, having one installed simply to take advantage of discounts to your home insurance policy could be a bad idea that’ll take far too long to pay for itself in discounts.
   
• Know your coverage exclusions. It’s important to know what types of disasters and circumstances are covered, and what aren’t. This can greatly inform what kind of home improvements will benefit you, versus making improvements that are costly but will take a long time pay for themselves. Knowing what’s excluded is also critical to being able to obtain additional insurance for certain kinds of hazards that you’re geographically susceptible to—like earthquake insurance if you live in California, or flood insurance if your house is located in a flood-prone region.
   
• What are your responsibilities? Before anything happens to your home, make sure you know your insurance provider’s policies on what your obligations are with respect to taking necessary action to prevent the development of problems. If you notice a leak in the ceiling and don’t do anything about it until it worsens, your insurance company may not cover the cost of repair if they determine it could have been prevented at an earlier time.
   
• Do you really need homeowners insurance? This is something of a trick question, because most home mortgage companies will either insist that you buy third party home insurance or will automatically place your home on their in-house (and far more costly) insurance plan. More often than not, this is a non-negotiable term of your mortgage. But if you’re in the position to be able to buy a home with cash, there’s no law that states you’re required to carry homeowners insurance. However, most everyone would agree that insuring your home with at least minimal coverage is important.