Shelter from the Storm - Understanding the Basics of Homeowners Insurance
should get homeowners insurance. It's what kind and how
much.
As the name suggests, homeowners insurance protects you if
your home is damaged or destroyed. Your lender will require to
you get homeowners insurance before your mortgage is
approved. The premiums -- perhaps a few hundred dollars a
year -- are usually paid through escrow and your monthly
house payments.
So as you shop around for the best policy, what should you
look for? Consider the following:
- In 1998, Northern New England experienced the worst ice
storm in recorded history, causing many limbs and trees to fall. - In 1991, Hurricane Bob struck Southern New England but
curved off the coast before it hit New Hampshire. Yet, it
caused more than $2.5 million in damages along
the Seacoast region. - The Blizzard of 1977 saw extensive damage along the
Seacoast as high winds and water destroyed roads and
homes. - Just about every minute, a house fire starts somewhere
- Every 19 seconds, a home is broken into.
Although rare in New England, tornadoes have been
reported in every state.
You can purchase extra coverage for earthquakes and floods.
(Note: the largest earthquake recorded in the 20th century in
New Hampshire occurred in December 1940; the epicenter
was west of Whittier and toppled some chimneys, broke some
water pipes, and cracked some walls. So could your New
Hampshire home use some earthquake insurance? It may
depend on how much of a worrywart you are.)
To determine if you need flood insurance, check your
disclosure statement to see if your house is in a flood plain
and research the flood history in your specific area. However,
flood insurance is only available where the local government
has adopted adequate flood plain management regulations
under the National Flood Insurance Program.
Although most policies cover and exclude the same types of
damage and phenomenon, not all insurance policies are the
same. Before you close on your house, do some research and
shop around. Ask at least three companies for quotes. You
may be able to save some money by choosing higher
deductibles and ganging your auto insurance and home
insurance with the same company.
And, of course, there are different degrees of coverage. When
securing quotes, pay careful attention to the varying degrees of
coverage and deductibles for:
Personal property coverage: In addition to protecting the
physical structure of a home, homeowners policies cover
personal property as well, including furniture, appliances,
electronics, clothing, jewelry, and keepsakes. This
coverage perhaps provides the best opportunity to play
with the deductible to see how it affects your payments.
Liability coverage: Typical policies will also cover you for
damage that may be caused by your own negligence
rather than a random weather peril. For example, if a
visitor slips and breaks her nose on your icy front steps
because you failed to scrape, shovel, and salt, your policy
will cover her medical bills and other costs.
Additional living expenses coverage: Check to see if
the policy covers your living expenses if you have to live
elsewhere while your house is repaired. If a fire, for
example, renders your house uninhabitable, such
coverage would provide the means for you and your family
to pay for another place to stay. It may even cover food
and other increased expenses, such as longer commutes.
Replacement cost coverage: Some insurance policies
will cover the depreciated cost of the item damaged; some
will pay the entire cost of replacing that item. The
difference can be significant.
Finally, it's important to not delay. If you wait to secure
insurance until the last moment before closing, you may be
persuaded to sign a policy that doesn't fit your needs just
right. Researching your available options, policies, and
companies can save you a good chunk of money.
Call a few local companies. Surf the Internet for more
information. And ask friends and neighbors how satisfied they
are with their policies.
In short, cover the basics. Then cover your property.
