You’ve bought your first home; now what? Many first time homeowners make the mistake of overlooking the importance of home insurance, but it’s worth taking the time to research what the right policy is for you. Homeowners should purchase home insurance to protect their homes and personal property. Everyone needs protection against liability for accidents that injure other people or damage their property.
Decide how much coverage you need.
The first step is deciding how much coverage you need. The better your coverage, the less you will have to pay out of your own pocket if an accident happens. In some cases, your lender decides how much coverage you need and may require you to buy a policy that covers at least the amount of the mortgage. Furthermore, the amount of coverage you buy for your house is also affected by the contents within your home and the personal property you own. You want to make sure the things of most value to you are covered by your homeowner’s policy.
Next, you should compare deductibles from a variety of insurance providers. The deductible is the amount you have to pay “out-of-pocket” on each claim and applies only to coverage on your house and personal property. Make sure when choosing a policy that you are comfortable paying the deductible if you make a claim. Remember, a policy with a $100 deductible will cost more than a policy with a $250 deductible. Higher deductibles may be available at a reduced price.
Determine how to replace items.
You also have the option to choose to insure your home and belongings for either replacement cost or actual cash value. Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. It is important to insure your home for at least 80 percent of its replacement value. Actual cash value is the amount it would take to repair or replace damage to your home after depreciation.
Find the right package for you.
Whether you rent or own a home, there are different packages of home insurance offered to protect your home and belongings. Each package protects against a specified number of events that cause damage to property; for example, fire, windstorm and theft. In addition, each package policy usually contains four additional types of coverage: property damage, additional living expenses, personal liability and medical payments. Check the newspaper and yellow pages of the telephone directory for companies and agents in your area. In addition, ask your neighbors, relatives and friends for recommendations on insurance companies and agents.
Read before you sign.
Before you sign any documents, be sure to read your policy carefully. A home insurance policy is a legal contract and is written so that your rights and responsibilities, as well as those of the insurance company, are clearly stated. When you purchase home insurance, you will receive a policy. You should read that policy and make certain you understand its contents. Keep your policy in a safe place and know the name of your insurer.
Check with your insurance agent at least once a year to make sure your policy provides adequate coverage. The addition of a room, new insulation or remodeling adds value to your home, therefore increasing the replacement cost of your home.
BancorpSouth Insurance Services is ready to help you protect your biggest investment. Let us help you through the details to ensure you're safe and protected!
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