How to Save on Homeowner’s Insurance When Buying a New Home, Part 2, What Homeowner’s Insurance Cost is Based On
By: Eric Kricher, Capstone Brokerage Private Client Advisor, December 5, 2014
Many local Las Vegas residents are, once again, considering buying a home in the valley. Last month in, “How to Save on Homeowner’s Insurance When Buying a New Home” I explained how homeowner’s insurance is an added cost to the “Price Tag” of a home. It is also important to consider what homeowners insurance cost is based on and what coverage is needed to better understand the price of a homeowner’s policy. The term “you better shop around” takes on a whole new meaning when it comes to putting proper insurance coverage in place.
Understanding the coverage needed is important part of the process to saving on a homeowner’s insurance policy. Homeowner’s insurance is based on the cost to rebuild the home, not the market value. Since rebuilding costs are on the rise determining the amount to rebuild is necessary. Insurance companies take several factors into consideration when pricing a homes rebuilding cost. Consumers can use services such as accucoverage.com which is similar to what insurance companies use to understand the cost to rebuild. Both would use the size of the home, costs of building material, labor prices and specific details about the home to help determine the homes rebuilding cost.
Homeowner’s insurance also automatically provides coverage for processions in the home based on the coverage amount. This cost is also considered when an insurance company is quoting you an amount for coverage. A standard example on how this coverage amount is determined would be 75% of the homes cost. So, if your home is valued at 300,000 then the content coverage (typically 75%) would be $225,000. This is added coverage that would be dispersed to replace items in the home such as furniture or other content. There are other limits of course for specific items, which is what makes listing valuable items on a policy very important. All homeowners need to take take inventory of what is in their home.
The last cost factor that homeowners can actually control is the deductible amount. One great way to lower premium cost is to choose a higher deductible. A deductible is basically the amount “deducted” from an insured loss. Deductibles are part of the insurance contract that represents a sharing of risk between the insurance company and the policyholder. When repairing your home or replacing personal possessions, the amount of the deductible would come out of the homeowner’s own pocket. So, keep that in mind when choosing a deductible amount. The homeowner needs to be comfortable paying the deductible in any case of loss.
Shopping for homeowner’s insurance coverage is like anything else you don’t want to pay more then necessary for the same item or service. An individual who is in the market to purchase a television for example, wants to get a good deal. They will often compare prices at retailers to find the least expensive option to suit their needs. This is when having a dedicated personal insurance agent becomes key. They can guide you on what coverage you need to be sure your property is replaced in the event of loss. A personal insurance agent can also “shop around” for the best price on homeowner’s insurance coverage often saving a buyer hundreds of dollars.
