How to Obtain Home Owner's Insurance

If you own a home, home owner's insurance is an absolute must. Not only is it essential to protecting your investment, no lender is going to finance you even a penny without it.

Difficulty:

Moderately Easy

Instructions

1. Calculate how much it would cost to rebuild your home. Many home owners mistakenly look at how much their home is worth. Insurance companies use guidelines for estimating replacement costs and the resulting premiums for total replacement policies.

2. Investigate different types of coverage. For instance, HO-1 is basic coverage that protects you from 11 different risks, including theft, fire and major breakage; by contrast, HO-5 covers everything except earthquakes, flood and war. (See How to Obtain Disaster Insurance.)

3. Compare different providers. Premiums differ depending on where you live, the value of your home, and other factors such as how long you've lived there and whether there have been past claims at that address. AllQuotesInsurance.com and InsuranceFinder.com are among several sites that can provide you with a number of quotes.

4. Find out what steps you can take to lower your premium cost, such as installing a security system. Some insurance providers will also offer lower rates for existing customers, so turn to your auto insurer for a home owner's quote first.

5. Save money by raising or lowering your deductible depending on your needs. A high deductible lowers your premiums but means greater out-of-pocket costs if something happens. For instance, increasing your deductible from $100 to $1,000 can save 20 percent or more on premiums.

6. Find out what the policy covers for your home's contents. If necessary, buy a floater for artwork, computers, jewelry, expensive photography equipment and other valuable items. Look into adding a rider for living expenses. This can help pay for your having to live somewhere else while your home is being rebuilt or repaired.

7. Make sure you're covered for liability in case a neighbor trips on your stairs and breaks a leg. Some home owner's policies also cover you when you are away from your home and are liable for someone else's misfortune; double-check under what circumstances your coverage kicks in.

8. Scrutinize your home owner's policy if your lender has attached it to your mortgage or refinance.

Tips & Warnings

• Do a complete inventory of everything you own to verify what's missing in case of theft or fire. Videotape all your belongings from clothes to jewelry to computers and home electronics and keep the tape in a safe deposit box.

• You'll have to shell out more money when something is damaged or stolen to supplement what your insurance company pays you, unless you have replacement value coverage. Some policies have inflation protection that covers the increasing cost of rebuilding your home.

• Read through your policy carefully to see what is and isn't covered. Then pay extra to get the coverage you've determined that you need.