Owning a home is one of life’s biggest investments, but too often, homeowners don’t give their homeowners insurance the attention it deserves. With the rising cost of repairs and the increasing frequency of natural disasters, it’s essential to make sure your homeowners insurance will provide you with the coverage you need. To help you stay ahead of the curve in 2023, here are our top 6 homeowners insurance tips for making sure you’re adequately covered. From understanding the differences between replacement cost and actual cash value to making sure you’re not underinsured, these tips will help you protect your home from the unexpected.
Understand the difference between replacement cost and actual cash value insurance
The most important thing to understand when buying homeowners insurance coverage is the difference between replacement cost and actual cash value insurance. Replacement cost coverage will repay you the cost to rebuild your home at today’s prices, whereas actual cash value insurance will repay you the cost of replacing your home at the price it was when you bought it.
If you have a $100,000 home that you bought 10 years ago, and it’s now worth $300,000, you’re going to need replacement cost coverage. If, however, you bought your home 10 years ago for $100,000 and it’s now worth $500,000, you’ll be better off with actual cash value coverage.
Know what your policy covers and what it doesn’t
Before you buy homeowners insurance, you should know exactly what your policy will and won’t cover. Depending on where you live, hurricanes, tornadoes, fires, and floods are all events that you may want to be covered for. Make sure to ask your insurance agent these questions to make sure you have the coverage you need.
Unfortunately, your homeowners insurance won’t cover every single situation. Specifically, your homeowners insurance policy won’t cover floods from rising water, earthquakes, or damage caused by nuclear incidents. These are considered floods not covered by homeowners insurance. However, you may want to look into flood insurance if you live in an area that’s at-risk.
Be aware of the different types of homeowners insurance
Depending on where you live and the state of the housing market, your home’s value may change over the years. To protect yourself against decreasing home values, you may want to consider buying a guaranteed replacement cost policy. Certain types of homeowners insurance policies utilize depreciating values, which means the value of your coverage will change depending on when your home was built and how much it’s worth today.
Guaranteed replacement cost policies are designed to protect you against decreased home values. In the event of a claim, you’ll receive the full value of your policy, even if your home’s value has decreased since you bought the policy. Guaranteed replacement cost policies do come with a higher price tag, but they are worth it if you are concerned about your home’s value decreasing.
Don’t be underinsured—make sure you have enough coverage
In order to avoid being underinsured, you should make sure you have enough coverage. While you don’t want to overspend on coverage that won’t be used, you also don’t want to be caught in a situation where you don’t have enough coverage to make a claim.
A good way to make sure you have enough coverage is to get a free homeowners insurance quote. By comparing quotes, you can find the right policy for you at an affordable rate.
If you find that you need to increase your coverage, you may be able to get a homeowners insurance rate increase. But, if you’re currently underinsured, you won’t be able to get a homeowners insurance rate increase until you have enough coverage to make a claim.
Consider additional coverage options
Collision insurance: If you have a car that’s less than 10 years old, you may want to consider purchasing collision insurance. Collision insurance will help you repair your car if you get in an accident. If you don’t have collision insurance and your car is totaled, you’ll only get the actual cash value of your car. If you have collision insurance, you’ll get the car repaired at the cost it would be if the car was brand new.
Liability insurance: Liability insurance will help pay for the cost of any injuries you or your family members cause to other people. Depending on the state you live in, you may be required to have a certain amount of liability insurance. If you have a business, you may also want to consider increasing your liability insurance.
Shop around for the best policy and rates
Finally, once you’ve decided on the type of coverage you want, it’s time to shop around for the best rates. Many homeowners don’t shop around for rates, but doing so can save you a significant amount of money on your annual insurance costs. Using a website like Insure.com, you can compare quotes from multiple insurance carriers in minutes. By shopping around for the best rates, you can make sure you’re getting a homeowners insurance policy that provides the coverage you need at a price you can afford.
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