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Homeowners Insurance: Things to Think About

Homeowners Insurance: Things to Think About

When purchasing homeowners or renters insurance many policyholders are usually thinking about two things: is this the least expensive policy I can find and will it satisfy my lender? While these are excellent questions, they shouldn’t be the only questions you are asking, and they shouldn’t be the only reasons that you purchase one policy over another. Here are three other important questions you should be asking yourself AND your broker before signing on the bottom line: Do You Have Enough Structure Coverage? Many homeowners base their structure coverage on either the purchase price of their home or the lender required insurance. While these are good starting points, they may result in a coverage shortfall in the event of a claim. The purchase price of a home often does not take into account the amount it would cost to replace the home in the event of a total loss. A $250,000 home purchased 10 years ago may cost $350,000 to replace in today’s market due to rising cost of labor and materials. Getting a check for $250,000 might seem great until you realize that extra $100,000 has to come out of your own pocket. In addition, if your policy has a coinsurance penalty, you may be on the hook for even more. A 90% coinsurance penalty says you should have insured your home for 90% of its replacement cost value or your claims payment will be penalized. You should be insuring your $350,000 home for at least $315,000, but you only insure it for $250,000 or 80% of the “should” value. In the event of a total loss the...