Homeowners insurance is essential for owning a home. During the home buying process, taking the time to understand how homeowners insurance works and how to secure the best possible deal gets overlooked amidst all the chaos. This guide makes understanding how homeowners insurance works simple.
The Different Types of Homeowners Insurance Coverages
There are different types of coverages when it comes to homeowners insurance. Each type has its own benefits and disadvantages, and ultimately the right one is based on your preferences and coverage needs. The primary types of homeowners insurance coverages include:
- Actual Cash Value – This coverage covers the cost to replace or repair the damaged part of your home or property. It takes into account depreciation.
- Replacement Cost Value – Replacement cost value does not take depreciation under consideration. Instead, it covers the cost of full replacement for the damaged property.
While there are other coverage options such as extended replacement cost value and functional replacement cost value, these are the two primary options for homeowners insurance coverage. Replacement cost value is, of course, more rewarding when a claim is made. However, actual cash value comes with less expensive premiums and deductibles.
How The Homeowners Insurance Process Works
There are three primary steps to keep in mind when personalizing your homeowners insurance policy. These three steps are to determine your coverage needs, decide between replacement cost and actual cash value coverage and compare homeowners insurance providers (and possibly quotes).
Determine Your Homeowners Insurance Needs
A standard homeowners insurance policy should include all or most that you need to protect yourself if an incident were to occur. The first step in the process when obtaining a homeowners insurance policy is to ensure you have all of the necessary coverage options. The main type is dwelling insurance. This covers damage that occurs to your home or attached structure. Other types of coverages you may need include:
- Other structures coverage
- Personal property coverage
- Loss of use coverage
- Liability coverage
- Medical coverage
Of course, there are many other add-on options to consider as well. Be sure to assess your current situation and specific risks that you may have to determine the best way to personalize your homeowners insurance policy.
Choose Between Replacement Cost vs. Actual Cash Value
As discussed, there are key differences between replacement cost value and actual cash value with your policy. It is best to determine whether you want lower deductibles and premiums with actual cash value or if you prefer more cost to restore your home or property after damage with replacement cost value if an incident were to occur.
Compare Homeowners Insurance Providers
If you are unsure about a quote you received, then it may help to shop multiple insurance providers. This helps you know you are receiving the best possible coverage based on your budget and coverage preferences. Several tips to keep in mind when comparing insurance providers are:
- Check the reviews of each provider;
- Find out how each provider responds to claims;
- Determine the provider’s retention rate (satisfaction);
- Speak with a real insurance agent; and
- Compare prices and the extent of the coverages.
Of course, the number one tip is to read through the proposed policy; the devil is always in the details. If it includes all of the essential coverage options for a good premium and deductible cost, then you can feel confident it is a good policy, especially if the provider checks all of the aforementioned boxes as well.
How To File A Homeowners Insurance Claim
It is important to understand how to properly file a claim if damage or loss occurs to your covered property. The process varies based on the reason for a claim. If a crime occurs (i.e. burglary), then you may first need to call the police. Similarly, if there is a fire, then you may need to call for the fire department as well. Be sure to document everything that the claim is about the best you can by taking pictures.
You can then contact your insurance provider once the initial risk and damage is taken care of after the peril occurs. You may be able to file a claim online by filling out a form. You may be able to call your insurance provider to make a claim as well. You should have all of the damage ready to report along with any specific information you need related to your policy, such as a policy number and the name(s) of the people whose name is on the policy.
Get In Touch With Merchant Family Agency Today
If you are interested in homeowners insurance, then consult with our professional team at Merchant Family Agency today. We are glad to further explain how insurance works and ensure you get a personalized insurance plan that meets your precise coverage needs and preferences.