Best Home Owners Insurance – 5 Tips to Getting Properly Covered

Standard home owners’ insurance policies are far from being the best home owners’ insurance policies.  Yet that’s what a lot of people get.  Most home owners think of their home insurance as a blanket that completely covers them.  In real life, it’s more like a slice of Swiss cheese. 

When you buy home insurance, you need to buy riders to make that slice of cheese be more like a blanket.  You noticed that I didn’t say, turn it into a blanket.  Because that’s not possible.  There are things your home insurance will not cover.  Your job is to get the most coverage.

1. Know what you’re buying and buy what you need

There are two types of home owners insurance, cash value and replacement cost.  Cash value pays whatever the depreciated value is at the time you need it to pay.   If your $200,000 is worth $178,000 when you make the claim, you get up to $178,000 even if you need $200,000 to get back to where you were. 

And homes do depreciate every year.  Depending on how well you take care of them, they lose a bit of value each year or a lot of value.

Replacement cost policies pay whatever it cost to replace an item.  There are two types: true replacement cost and functional replacement cost.  True replacement cost policy will replace your hand-made stair rails with hand-made stair rails.  Functional replacement will get you a set of stair rails that do the job.

Replacement cost coverage will cost you a bit more, at least 10% more, but it’s worth it.

2. Cover yourself against known foes
   

Each year of my life, things cost more.  Overall not a lot each year, however, some items did go up a lot in the space of a few months.  A lot of the items that have done that are used to build and repair houses.  Do you have an inflation rider? 

Also, have you made improvements to your home?  Did you tell your agent?  You do want the improvements to be covered, right? 

3. Are you covered against water?

If you live in a flood zone, you need flood insurance.  But the flood insurance will not covered flooding not caused by rains making rivers overflow, won’t cover flooding caused by sewage defects.  Nor does a standard homeowners insurance.

All that means you have to buy extra insurance for that.

4. Building codes changes
   

Building codes change all the time.  Some of the changes make rebuilding your home more expensive.  Standard home owners’ insurance doesn’t take that into account.  If you took out your policy in 2001 and had only standard insurance, you will be covered to rebuild your home to 2001 code.

If your city building codes now require more expensive materials or more of them, the cost to have a house the city deems livable is higher.  But you’re not covered.

To be covered you need to buy purchase ordinance and law coverage.

5. Is your rent covered?
   

You didn’t think of this one because you’re a homeowner not a renter.  However, if your house gets severely damaged you won’t be able to live in it.  You can move in with relatives, yes.  But you could rent and have the insurance policy pay for your rent.  No risk of stressing relationships.

Keep in mind that not all insurers deal with this the same.  Some have limits on how long they pay rent, some limit the payouts in terms of a percentage of the policy (20% of the insurance on the house). 

These limits can be increased for an additional premium.

If you’re after the best home owners insurance, these 5 tips will help.  But your situation might require more.  The problem most people have, they don’t read all their policy.  There are exclusions in there.  Some of them make sense to have, given your situation; others do not.  Know what the exclusions are, pay extra to have the ones you need removed.  That’s the only way to get the best home owners’ insurance.