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Five Features to Look For in a Home Insurance Policy

Whether you have already purchased a home or are just starting to look, you know it isn’t the easiest process.  After you’re pre-approved for a loan, you have to determine your price range, decide where you might want to live, see what houses are available in those communities, rush to see the home before another prospective buyer looks at it, get your offer accepted, etc.  It can be stressful and exhausting, so when it comes to getting home insurance, you might not take the same care and effort to find the perfect fit for you.  A lot of home insurance providers offer similar protections and guarantees, but here are five features to look for when shopping for insurance to protect your new investment.

Guaranteed Replacement Cost: Ask whether your policy caps how much the company will pay to rebuild your home.  What happens if a labor or material shortage in your area causes building prices to spike unexpectedly?  What if the insured value of the home was too low?  Avoid these problems by finding a policy with Guaranteed Replacement Cost.  This coverage guarantees that your home will be rebuilt with materials of like kind and quality – with no cap.

Additional Living Expenses: If there is damage to your home and you have to live somewhere else while work is being done on your home, does your coverage help pay any added living expenses?  Odds are it does, but is your coverage limited to a specific dollar amount?  Look for a policy that pays additional living expenses for a specified period of time, such as 12 months.

Tree Removal:  If a windstorm knocks down a tree on your property, does your coverage provide anything towards the removal of the tree?  Removing a large, mature tree can be expensive – look for a policy with a generous limit, such as $1,500.

Deductible Structure:  How does your policy determine the amount you must pay out of pocket (your deductible) in the event of a claim?  First, find out whether your deductible is a flat dollar amount or a percentage of your home’s insured value.  If it is a percentage, you may be responsible for more than you anticipated.  For example, using the percentage method, if your home is insured for $200,000 and your policy has a 1% deductible, you will have to pay the first $2,000 of any loss.  Under the percentage method, also keep in mind that as the insured value of your home increases with inflation each year, your deductible increases too.  Second, pay attention to whether your policy has a separate deductible for wind/hail.  Many companies impose a higher out-of-pocket requirement on you in the event of a loss due to wind or hail.  In the Midwest, roof claims due to wind or hail are among the most common.  Be careful that you haven’t accepted more out-of-pocket risk for these common claims.  Third, ask whether your company will waive your deductible altogether in the case of a large loss – some do.

Equipment Breakdown Coverage:  This optional add-on provides primary coverage for mechanical, electrical, and pressure systems breakdown. It reduces gaps in home coverage, and can replace more costly home warranty programs and “big-box” retailers’ extended warranties.

Even if you already have home insurance, it’s a good idea to review your policy periodically to see how it compares to what else is out there. There may be a better option for you and your home.  What are features that you look for in a home insurance policy?  Let us know by commenting below.​

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