Smart Ways to Win at Homeowner’s Insurance: Part Two

Last post, we talked about the first two ways to win: by being prepared to win an insurance claim with clear proof of what you own and its current market value; and ways to reduce your premium. (You can review it here.) Now let’s discuss other concrete ways to quit giving your insurance company so much money every month.

3. Check your deductible

It may have changed. The deductible is the amount of repair cost you are required to pay toward a claim. You don’t actually pay it to the insurance company; it is deducted from the amount the insurance company pays you for the claim. Deductibles mean you share the risk with the insurance company, so the higher the deductible, the lower your premium costs.

Insurance companies are moving deductibles from set amounts to percentages, which can often result in a significant change. Choose the highest deductible you can afford, while keeping in mind that deductibles are a percentage of the value of the property, not of repair costs.

4. Really know the limits of your policy

Do not make the costly mistake of learning after you have weather damage that all perils aren’t covered. Too many homeowners learn the hard way that many standard policies exclude damage from flooding, earthquakes, and landslides. Take the time to learn which perils you are at risk for, and if you policy covers each.

If you live in a flood-prone area, for example, you may need or even be required to add supplemental coverage, which can cost $1,800 to $3,600 on a building WORTH $150,000 containing $50,000 in contents.

Also, take note of common exclusions. There’s a commercial running these days poking fun at  insurance policies that cover a zombie apocalypse, but not a broken central air unit. It’s a commercial for gap insurance, which can be very helpful. So learn what you current policy includes and excludes, and find out if you need to add special coverages or even get a gap policy. You can rest easier if your major systems and assets are fully covered.

5. Review how much coverage you actually need

Prioritize the home itself. Then see if you can afford coverage for your possessions, living expenses, and liability. Use recent per-square-foot replacement costs to decide your base coverage level, not your home’s appraised value, which includes land value. It’s important to use local figures, as replacement costs vary greatly from region to region, as to land value to appraised value ratios. If you live in an area that frequently suffers hail damage or other severe weather damage, consider getting an extended or guaranteed replacement policy, which will protect you from inflated labor and material costs following catastrophes, when price gouging can become an issue.

As the number of natural disasters rises in frequency and intensity, it is critical that you know and use your insurance to your best benefit. Don’t wait until you have a claim.

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