What Coverage Do You Need for Homeowners Insurance?
More than just a mortgage lender's requirement, homeowners insurance can be a worthwhile monthly investment disaster should strike. Policies typically cover liability, loss of personal property and "loss of use," which refers to the costs of not living in your home because of damages. The amount of coverage that's best for you depends on your risk and the value of what is being protected.
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Liability Insurance
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The liability insurance coverage in your policy protects you against claims for negligence, personal injury or damage on your property. For example, this coverage would include a lawsuit from downstairs neighbors if your overflowing toilet damaged their apartment. It can specifically exclude injuries to domestic workers if state law requires them to be covered under workers' compensation insurance.
Loss of Personal Property
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A good rule of thumb is that loss of personal property covers anything that can be taken out of your apartment, even with some difficulty (like improvements made to a condo or co-op). Some policies are "all risk," meaning they ensure any risk unless specifically named otherwise, while some are "all peril", which only cover risks named in the policy. It's also important that your policy covers "replacement cost" to pay for the cost of replacing your lost property as opposed to "cash value," which only covers the value of your property at the time it was lost. Umbrella policies cover extra liabilities or valuable items like collectibles or heirlooms.
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Calculating How Much Insurance to Buy
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Experts recommend taking photographs or videos of your home and using it to make a list of all of the property that could be insured, each item's replacement value and adding them up to get the value of your insurance coverage. It's a good idea to note the make, model, price paid and purchase date on the list and keep it with the photographs and a copy of your policy in a place that will be safe should something happen to your home because if you ever have to file a claim, you must prove that you owned the property you're claiming. If you live in a co-op, it might also be worthwhile to review your proprietary lease to ensure that your policy covers all of the items you may be responsible for in your apartment.
Differences Between Policies
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Policies with the same coverage can still have important differences. For example, insurance companies may have different ways they disburse coverage after your loss, such as the time frame within which you must make replacement purchases. This can be tricky if the policy requires you, for example, to buy replacement cabinets before your kitchen damage is repaired. Also, policies with a lower deductible, or amount of the loss you must pay before the insurer pays the rest, may have higher premiums or cost.
Savings on Homeowners Insurance
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Aside from higher deductibles, there are a few measures you can take to lower your homeowners insurance premium. First, avoid filing claims unless they're absolutely necessary. Check with insurers to see if purchasing homeowners insurance with car insurance, being a non smoker, being located near a fire department or installing smoke detectors or deadbolt locks can lower the price of your policy.
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