How to Compare Homeowners Insurance

An insurance agent shares his tips to help sort through the confusion of comparing homeowners insurance policies. These steps will help make sure you get the coverage you need.

Difficulty: Easy

Instructions

Things You'll Need:

• A copy of your current policy (if applicable)

1. Are you covered for "Replacement Cost?" Check to ensure you are buying replacement cost coverage for your home AND contents. Homeowners insurance used to be written on an Actual Cash Value Basis, meaning a deduction is taken for depreciation at claim time. Most companies offer replacement cost as a standard feature now but there are a few that do not.

2. Compare Deductibles. Look for a dollar deductible, not a percentage. The average homeowners deductible is $500. Wind and Hurricane areas often see wind deductibles of 2% of your total loss. Avoid this unless your home's location leaves you no alternative.

3. Check the basement. If you have a basement you NEED water (sewer) backup coverage. Damage caused by failure of sump pumps and drains is not covered unless you buy coverage as an endorsement to your policy. Prices range from $20-50 for the first $5,000 of coverage and average $5 per thousand after that.

4. What Perils are covered? Is your coverage provided on an open perils or named perils basis? Most policies cover your home on an "open perils" basis meaning any cause of loss not specifically excluded in the contract is covered. Contents, however, are usually covered only for a set of 10-16 named perils such as fire, theft, etc. If your policy says "special contents," is written on an "HO5" form or has a "special personal property" endorsement, you will have open perils coverage for your personal belongings as well as your home. This is important as without it you will miss many coverages such as accidental breakage, overturn of a moving truck, and odd losses such as spilling paint or otherwise damaging furniture or appliances.

5. Compare the Add-ons. Many options are available. Look at your policy or quote. After the limit for your home, contents, and liability insurance you will see endorsements such as identity theft protection, earthquake coverage, liability for other properties you may own, and home business coverage. A handful of companies are even beginning to offer equipment breakdown coverage as an endorsement. This is a great perk that usually only costs $20-30 per year.

6. Schedule Any Valuables. If you have valuable jewelry or collections you should schedule them on your policy. The benefits include: 1. No deductible for scheduled items 2. Enhanced coverage (even for losing or chipping jewelry) and 3. increased amount of coverage available for your remaining, unscheduled belongings.

7. Remember, Flooding is not a covered peril! To get flood coverage you must buy Flood insurance from the NFIP (available through most local insurance agents).

Tips & Warnings

• Ask for Equipment Breakdown Coverage. In the last two years many companies have rolled out a new endorsement that will cover breakdown of appliances, furnaces, and nearly any home system. Average cost is $20-30 per year. The catch is you are required to pay the deductible, which is usually $500, but that's a small price to pay for a whole new furnace or A/C unit!
• Always ask if your policy has any specific limits not shown on the quote or declarations page (summary page of your policy). If your carrier does not cover theft or limits theft coverage to a low dollar limit walk away from the deal immediately.