Is Basic Homeowners Insurance ALWAYS Financially Sound?

It is never a good idea to go without basic homeowner’s insurance; if something happens to your home, the financial burden will fall entirely into your lap. While homeowner’s insurance can seem like a financial drain on your monthly income, it is a necessity and in the long run it is certainly financially sound. Basic homeowner’s insurance does not have to be a monthly financial burden if you know how to change your policy in a way that maximizes its effectiveness and potential at the smallest price possible.

Browse the Market

If you are dissatisfied with your current homeowner’s insurance policy, it might be time to shop around for a new one. There are many providers and policies can vary greatly from provider to provider. You should expect to explore at least five different insurance quotes from different companies. It is important that you read each policy carefully and look for the best deal out there before making any decisions.

Lower Your Premiums

If you want to stay with your current homeowner’s insurance provider for one reason or another – perhaps you are particularly fond of the company or perhaps you get discounts by also insuring your car or boat with the same company – you should investigate how to lower your premiums. Start by asking an agent from the insurance company about what you could do around your house or yard to lower the premiums. There might simple things, such as maintaining clean landscaping in your yard or fixing pot holes in your driveway, that you can do to significantly lower your homeowner’s insurance premiums. 

How Much Coverage Do You Need?

One question that homeowners often ask is how much insurance is enough? The answer depends on several variables. In an ideal world you would want 100 percent coverage, meaning that if the house was damaged or destroyed you would be reimbursed 100 percent of its replacement cost. However, this is the most expensive option. It is generally recommended that you cover at least 80 percent of your home’s current replacement cost: by covering less than 80 percent you will be reimbursed by the “actual cash value” of your home in case of damage or destruction which means that depreciation will be factored into the value of your house at the time of the damage or destruction. 

Know How Much Your Home is Worth

In order to make sure that your basic homeowner’s insurance policy is truly financially sound, it is imperative that you know the value of your home based on how much it would cost you to rebuild your home from scratch if it were completely destroyed. This figure is irrespective of the current market value of your home. For example, if your home would sell on the market for $200,000 but to rebuild it from the bottom up would cost you only $125,000 then the latter is how much you should insure for.