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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
Fifteen minutes for a car insurance quote is one thing. When it comes to homeowner’s insurance, the best plan is to spend a lot of time and do a lot of homework. We have details. When Selecting Homeowners Insurance Low Cost Usually Means Poor Coverage By Britt Erica Tunick Insurance companies spend millions of dollars each year advertising their services and trying to get consumers’ attention. But don’t let a talking gecko or quirky character influence which insurance provider you choose to insure your home and the possessions within it. The cheapest option is rarely the wisest choice. As with most things in life, when it comes to insurance you get what you pay for. That lesson was learned by far too many people in the wake of recent disasters such as Hurricane Sandy, when insurance payouts frequently proved insufficient to rebuild destroyed properties or homeowners were forced to sue providers for payment. The lowest cost insurance coverage may seem attractive because it means more money in your bank account today, but it may also mean a much lower payout or delayed payment when disaster strikes. So when looking for homeowners insurance, the best bet is to get multiple quotes for comparison and call independent providers to find out which insurance companies in your area have the best history of paying claims quickly. It is also important to do your homework and determine how much coverage you really need to rebuild your home. While most mortgage companies require home buyers have insurance before getting a mortgage, the coverage most insurance agents will immediately offer is rarely sufficient. Many people then find themselves under insured when disaster strikes. Homeowners insurance should cover the cost of completely rebuilding and refurnishing your home if it were to burn down tomorrow. Insurance coverage also shouldn’t be taken at face value. A $300,000 homeowners insurance policy doesn’t necessarily mean your provider will write you a check for $300,000 if you house is destroyed. In many cases, if an insurance provider determines that the rebuilding cost of your house is actually $450,000 and that you are only insured for two-thirds of your true need, your payout is likely to be only two-thirds of your coverage. That means that you are likely to get a check for only $200,000 in the end. Similarly, don’t just assume your contents will be replaced at face value. You may have paid $600 for the iPad you bought last year, but few insurers will actually give you the cost of buying a brand new iPad to replace it. Instead, many insurers will factor in depreciation for your possessions, meaning you’re more likely to get a check for the cost of buying a year-old iPad on ebay, or whatever value the insurer’s calculation methods ascribe to a year-old iPad. So don’t hesitate to ask if the policy you’ve selected has historically reimbursed homeowners for the replacement value of their items, or at a depreciated value. One way to determine how much homeowners insurance you need is to have a contractor look at your home and give you a quote for what it would cost to build from scratch. It also pays to get estimates for high value items and to keep these in a safe place, such as a fire-retardant box or a safe deposit box. |
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