Your Home Insurance Policy: How Much Coverage Do You Need?
Buying home insurance is a delicate matter, and one that must be carefully thought of. You cannot simply buy the cheapest or the most basic coverage. Remember that the more comprehensive your policy is, the less you would have to pay personally, should a disaster strike. The simplest way to determine just how much is enough is to consider the cost of rebuilding your house and replacing its contents. And of course, you’d also have to consider the costs you will entail should someone get injured in your house and file a lawsuit against you.
To help you arrive at a better decision, here are the types of homeowner’s insurance policies available:
• Type 1: The most basic policy, which protects you against 11 mishaps such as lightning, fire, smoke, windstorms, etc.
• Type 2: This is a policy that protects you against 17 perils, including the ones covered in Type 1, plus snow, ice, falling objects, and faulty electrical systems damages, among others.
• Type 3: This is the most favorable option for most people because it covers all perils except earthquakes, flooding, and nuclear accidents.
• Type 4: Also referred to as the renter’s insurance, it offers protection for personal possessions but not the residential structure.
• Type 5: This is a very comprehensive insurance policy since it also includes extras such as coverage for antiques, jewelry, and art pieces. Opting for this type of coverage is like bundling all add-ons in a single policy.
• Type 6: Similar to Type 4, this insurance policy covers only the personal possessions and not the property itself. But, aside from this, it also provides liability coverage.
• Type 8: Also known as the “Older Houses Insurance,” this policy is suitable for beautifully crafted old homes that are not qualified for other types of coverage due to the high cost of rebuilding it.
Apparently, the more comprehensive the insurance, the more expensive it is. And although it is recommended to opt for one that gives you the most coverage, you also have to consider how much you can afford, exactly. In any case, before choosing a particular coverage, consider the following:
• Your policy should be enough to cover your property and everything you have inside it.
• It should protect you against lawsuits.
• It should be enough to cover your housing lender’s requirements.
• And lastly, it should meet your insurer’s requirements in terms of coverage for replacement cost protection
The above article was produced as a service to readers of the Internet Loan Guide, a leading consumer finance and savings website with a mission to help consumers make sound finance decisions by incorporating math and uncovering the hidden fees.