Smart-shopping tips for purchasing homeowners insurance

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It seems the news is always full of stories on natural disasters, from floods to earthquakes and the tornadoes that hit parts of Michigan a few months ago.

While Michigan, thankfully, does not suffer severe flooding or earthquakes very often, there are plenty of other disasters that can befall homeowners here. That’s why everyone needs homeowners insurance. This policy, required by most lenders when you buy a house, covers damage from fire, burglaries and many other incidents, although added coverage for occurrences like hurricanes and earthquakes may be required in some areas. It should be noted that standard homeowners insurance does not cover damage from a flood or sewer backup.

Making sure your dwelling, whether it is a modest bungalow or a dream estate, has enough coverage to prevent you from experiencing financial disaster should a natural disaster hit, is something all homeowners should check on.

While insurance is a complex purchase, with no single policy right for every homeowner, experts have some suggestions that should make the decision process easier.

Shop for your best deal

When it comes to insurance, policies and premiums vary widely. By comparing different companies, you could save hundreds of dollars a year or more. Make sure you’re looking at policies that have similar deductibles and offer the same coverage.

And if you’re in the market for a new house, when visiting a prospective home, look for features that might make the home cheaper to insure, such as alarm systems, new heating or plumbing, or deadbolt locks. Such features make a house less likely to be broken into or suffer a furnace failure or leaks, saving the insurance company money it might be willing to pass on to you.

Put your deductible as high as you can afford. The deductible is the amount you have to pay yourself for repairs before your insurance kicks in. Once you know what policy you’re going to buy, ask what your deductible options are. A higher deductible, such as $1,000 or $2,500, could shave as much as 30 percent off your premiums, according to the Insurance Information Institute.

Many experts also recommend saving your insurance for really big disasters, such as fire damage or a tornado. Insurance companies consider people who file several small claims bad “risks,” making them unpopular to insure. You could find yourself without coverage or paying much higher premiums if you file several claims in a short period of time.

Insure for your home’s true rebuilding costs. Make sure your policy guarantees to pay for the cost of rebuilding your home should a disaster occur. Some policies don’t adjust for inflation, leaving homeowners with a funding gap. Be sure to tell your agent about any major improvements that could increase your home’s value, such as a new deck, bathroom or bedroom.

However, don’t include your land’s value when estimating rebuilding costs and how much insurance you need. The land on which your home sits probably won’t be substantially damaged by fire, tornados or other disasters, so don’t include it in your coverage.

Quit smoking

There are many reasons why people shouldn’t smoke, but did you know it could affect the amount you pay for homeowners insurance? Since cigarettes are a major cause of house fires each year, some insurance companies offer discounts if no one in a home smokes.

Stay with your insurance company

While you should periodically shop to make sure the rates you pay are competitive, also remember many companies offer loyalty programs for long-term customers. Stay put and you could save up to 20 percent off your annual bill.

Multiple-policy discounts

Many insurance companies will give homeowners a substantial discount on their annual premiums if they insure their car and house with the same company.

Since all homeowners have different needs, consult with a licensed agent to find out what’s right for you.

By Harry Cassidy | February 12, 2016

Credit: The News-Herald

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