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Your Guide to Buying Homeowners Insurance


Consider homeowners insurance a sort of jack of all trades.

It covers not only the house itself, but the contents inside; you're also covered for the loss of its use (putting you up at a hotel if you lose use of the home); the loss of other certain personal items of the homeowner outside the home; as well as any accidents that may happen inside the home that leave you open to a lawsuit.

Sounds complicated, but here's the bottom line for how much you need: If your home were destroyed tomorrow, would insurance rebuild the house and replace all of the contents inside? Many policies will offer this "replacement" value as the default coverage, but check to be sure.

If it's not replacement value, be wary of policies that offer "fair market" or "cash value" policies. These will reimbursue your items for their value now, which takes into account depreciation and wear and tear, but which might be far less than what it costs you to replace your belongings. In addition to coming up short with the dollar figure, you'll also have to document the value of your stuff.

What Do I Pay?
Many things could affect your premiums. For example, installing a sprinkler system will help protect the structure and the contents inside and should lower your premium. If your deductible -- which is the amount you pay if you make a claim -- is higher, your premium is lower.

Also, be aware that you want coverage for the amount it would cost to rebuild your home and replace the items inside. That's not the same as market value; it's simply the amount it would take to rebuild the home, not taking into account the land costs. A local builder or real estate agent could help come up with an estimate. Many policies will cover your household goods at 50% of the home's replacement cost; check through your belongings and determine if it's enough coverage.

Also be sure to check out the liability coverage in your policy, which covers you if someone were to have an accident and get hurt on your property.

Things You Might Not Have Coverage For
Some items are typically not covered by homeowners insurance, such as floods and earthquakes.

You should also check out coverage for high-value goods, such as jewelry. Insurance companies will often place a ceiling on how much they'll cover, so you'll need to investigate a special add-on, or "rider," to your coverage.

To help you determine all this, draw up an inventory of your stuff to ease the claims process. The Internet has made this easier, with several sites offering software that makes it easy to inventory all your stuff by room, with purchase dates, replacement costs and serial numbers. You should also upload photos to create a visual record.



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