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HOMEOWNER’S insurance protects your house and personal belongings against risks such as fire, falling trees, theft and water damage from burst pipes, while also providing coverage if someone has an accident at your home and sues you. But are you fully protected?
Take a look at the policy’s coverage limits. Would you be able to rebuild your house for the sum specified—or should you call your insurer and ask that it be increased? Rebuilding could be far more costly than you imagine, in part because you would likely need to meet current building codes.
Homeowner’s insurance typically caps how much it will pay out for specific items, such as jewelry, silverware, electronics, collectible coins, fine art and so on. If you have items that are especially valuable—meaning they’re worth more than a few thousand dollars—you might talk to your insurance company about purchasing extra coverage.
Standard homeowner’s insurance usually doesn’t cover earthquakes or flooding caused by, say, an overflowing river or an ocean surge. Instead, you’ll need a separate policy or a special rider to cover those risks. Damage caused by mudslides, sinkholes and riots also isn’t covered, so you might obtain riders to cover these possibilities. If you operate a home business and have others regularly coming into your house, talk to your insurer about a special rider or a separate policy to cover the risks involved. In addition, in case you’re sued, you may want umbrella liability coverage to supplement your homeowner’s policy.
All this extra coverage will boost your premium payments. To offset that hit, you might look for ways to trim your premiums. For instance, you could raise the deductible on the policy from, say, $500 to $2,000. You might also qualify for a discount if you have smoke detectors, a sprinkler system, and a fire and burglary alarm system that alerts an outside service. In addition, you may get a discount if you buy a variety of policies, such as auto, home and umbrella liability coverage, from the same insurance company. Maintaining a good credit score can also help hold down your insurance costs.
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This article got me thinking about my homeowners insurance, and the sizable premium increases over the past 2-3 years. Homeowners insurance has different “rules” than auto insurance — my auto insurance premiums are primarily based on how I and the others named on my policy drive. Premiums increase if there are speeding tickets, claims resulting from accidents, etc. With homeowners insurance, 2 years ago when my premium increased 40% from one year to the next with no claims or coverage increase, my insurance agent explained that increase as being due to hurricane-related claims in the southeast portion of the country as well as the need for the insurance company to also pay for insurance to cover their claims payments. Now, with all the claims from the wildfires in California, I am truly concerned about what is going to happen with my premium at the next renewal time.
Has there always been this difference in how auto and home insurance premiums are calculated?