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Personal and Business Banking

About Homeowner's Insurance

Homebuying and Mortgages

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About homeowner's insurance

Homeowner's insurance protects you and your lender against losses from fire, wind, falling objects, and other hazards. It typically covers water damage losses if the source of water is inside the home (like a broken pipe). Floods would be covered by National Flood Insurance if your home is in a flood-prone area.

In some parts of the country, types of coverage may be impossible or very expensive to obtain. For instance, it's difficult to get coverage against wind and storm damage where hurricanes and tornadoes are frequent. Try to obtain earthquake coverage in California.

Personal property coverage

Homeowner's insurance usually covers losses to the contents of your house from theft, fire, and other perils. These policies typically include some liability coverage in case you are sued (unless the suit is auto related). This provision can also be negated if you operate a business from your home.

If you rent a home or apartment, you'll want Renter's Insurance for the personal property and liability protections it offers.

If you have valuables such as antiques, art, gems, and firearms that exceed the coverage limits in the homeowner's policy, you should seriously consider having this property appraised and purchase additional coverage for these items. See below.

Factors that influence cost

You can't afford not to have homeowner's insurance, and your lender will typically insist on it. You can reduce the cost of coverage by paying attention to these factors...

  • Fire protection – The distance from your home to a fire hydrant and fire department and presence of smoke detectors or sprinklers affect cost.

  • Building materials – Masonry, such as brick or stone, often carry lower rates than wood or vinyl because they are less susceptible to wind and fire damage.

  • Theft deterrents – A home security system and dead bolt locks reduce theft risk.

  • Location – Local crime rates, hurricane, tornado, and earthquake dangers can affect rates and availability. Proximity to airport runways affect falling object/aircraft coverage.

  • Deductibles – You can lower the cost of coverage by agreeing to pay the first portion of a claim out of your own pocket. The higher the deductible you agree to pay, the lower the price.

  • Product features – A policy that insures at replacement cost is more expensive than one that pays claims at the value of the item at time of loss, but it's worth it.

Make sure your coverage keeps up with home value

Since most homes rise in value, you'll want to make sure your homeowner's coverage keeps pace. Here are some guidelines:

  • Purchase enough insurance to cover the cost of rebuilding, which may carry a higher price tag than your home's market value or assessed value. For example the house you insured for $150,000 five years ago could cost $200,000 to rebuild today – leaving you under insured when you file a claim.

  • Make sure your policy has an inflation rider so coverage automatically increases.

  • Purchase insurance which covers at least 80% of your home's replacement value. If you're covered for less, you give up the right to collect the full replacement value of your home.

In addition, if you own a home over 20 years old, consider purchasing additional coverage which assures that any rebuilding will bring your home into compliance with updated building codes and zoning laws.

Most homeowner's policies cover the personal contents in your home for 50% of the insured value of your house. For example, if your home is insured for $150,000, you would receive $75,000 for the loss or damage to its contents. You should consider additional coverage for expensive items.

Increased net worth? Consider Umbrella Liability Insurance

Many homeowner's and auto insurance policies provide a minimum liability coverage of $100,000. While these amounts may be adequate for some, the higher your net worth the more likely the possibility you may be sued for amounts considerably higher than these if you become involved in a lawsuit, particularly if you have teenage drivers on your policy. You may want to consider purchasing umbrella liability insurance, which kicks in where your homeowner's and auto liability coverage ends.

For example, you borrow your neighbor's car while yours is in the shop and get into an accident. In most cases, your umbrella liability insurance would cover this accident, right down to paying for defense costs if needed. The peace of mind is invaluable and the cost is relatively inexpensive – approximately $200 to $500 annually.

As with all insurance coverage, be certain you comparison-shop for policies and coverage which best meet your ever-changing needs. As an independent insurance agency, DCU Insurance can help.