A Look at Homeowners Insurance Costs
If you've looked at your premiums lately you probably already know how much your home insurance costs, but how much should it cost? Are you paying too much? Or perhaps you're not paying enough and don't have decent coverage. Or maybe you're buying a new home and you don't yet know what the going rate is in your neighborhood.
Many variables go into the pricing of insurance, so you will have to do some research in order to determine how much homeowners insurance is going to cost you.
How important is homeowners insurance and what will happen if you don’t have enough insurance? Insurance provides a relatively inexpensive way to protect your property and your fortune from ruin in the event of a catastrophe. There is no way that you can determine if something really bad is going to happen to you or not, but if you don’t take it into consideration the consequences could really be catastrophic. If your home and your possessions are wiped out or you are involved in an uninsured liability lawsuit you would most likely be faced with bankruptcy.
Let's take a quick look at what exactly home insurance is and how it helps you before delving into costs.
What is insurance? In exchange for the payment of a relatively small sum of money (the premium) the insurer assumes the risk of financial consequences for the loss of your property or the risk of loss because of a liability lawsuit. Insurance can provide financial security and peace of mind for the average consumer.
Homeowners insurance is the type of property insurance that covers private homes. It is a policy that combines various personal insurances which can include losses occurring to your home and its contents, as well as liability insurances for accidents that may happen at home. The cost of homeowners insurance depends on what it would cost to replace the house and whatever additional items that you want to insure.
Ok, now on to costs. How much home insurance do you need to buy?
You need enough insurance to cover the cost of rebuilding your home. You can estimate this by multiplying the total square footage of your house by local building costs per square foot (check with your local builders association or insurance agent to determine these figures). In addition to the structure of your home you will want to consider personal possessions, what it will cost for you to live elsewhere while your home is repaired and your liability to others. Keep in mind that standard homeowner policies provide coverage for disasters such as damage due to fire, lightning, explosions or theft. They do not cover floods, earthquakes or damage caused by lack of routine maintenance.
Most home buyers borrow money in the form of a mortgage loan and the lender always requires that the buyer purchases homeowners insurance as a condition of the loan. The price you pay for your homeowners insurance can vary by hundreds of dollars depending on who you buy your insurance from.
If you do your homework and shop around you could save a considerable amount of money. Check various insurance agencies, consumer guides and get online quotes to get an idea of price ranges. Those are the best resources to figure out how much home insurance should cost.
The National Association of Insurance Commissioners (www.naic.org) has information to help you chose an insurer in your state. Be prepared to ask questions about how you can lower your homeowner insurance costs. Ask about raising your
deductible in order to decrease your premiums. Do not include the cost of your land when insuring your house, buy home and auto policies from the same insurer, take steps to improve home security, disaster proof your house and ask about other discounts. Consider the cost of homeowner insurance when you are house hunting. A solid home, with up to date wiring, and located by a fire hydrant could give you some significant breaks.
Home owner insurance is designed to protect you but shop around, know what you need and ask your agent about discounts. Make certain that you purchase enough coverage to replace what is insured.
Source: The Complete Book of Insurance