What should I look for in homeowner's insurance?

May 10, 2007 10:59 AM

Just bought my first home! What should I look for in homeowner's insurance?

I know nothing about this. What should I be on the lookout for? Does anyone have a positive experience to share about their insurance company? My house is pretty basic, not on a flood plain or anything unusual.

posted by hazyspring to home & garden (13 comments total)

I will let others explain the nuts and bolts of the insurance. But I will say this: do not underestimate the importance of having a name and a face to contact when the shit hits the fan. When our house flooded, I had to jump through hoops on the phone with a big insurance company to even talk to someone. They wouldn't even come and look at the house and simply said I "wasn't covered". For that reason alone, I chose a local agent when we bought our new house. I know who he is and where to reach him when I need him.
posted by cosmicbandito at 11:13 AM on May 10, 2007 [1 favorite has favorites]

I second cosmicbandito: work with a local agent. An independent insurance agent can compare companies and find the best policy for you. (I am not an agent or related to one.)

Make sure that your insurance amount is enough to cover a complete reconstruction of your house, not just its market value (they may differ depending on construction costs and raw material in your area)--note that a reasonable amount may be less than you paid because the land will still be there even if the house burns to the ground. (But take into account any special landscaping.)

Also look for the amount of liability coverage and personal property coverage the policy offers, and get riders for jewelry, heirlooms, computers and other electronics, collectibles, or other property that is not covered by the standard policy. Also, ask about how different deductibles will affect the cost of the policy; you might save a lot of money with a larger deductible, though if you have a mortage, your bank or mortgage company might have limits on deductibles.

Financial planning books, like Kiplinger's or Beth Kobliner's, have more extensive discussions of insurance. I recommend getting a couple from your library and reading the relevant chapters.
posted by brianogilvie at 11:54 AM on May 10, 2007

I'd stick with one of the big name companies. I've owned a home for about 15 years and never filed a claim. One to think about is up your deductible to $1000 - it'll lower your premium. Also, if you are happy with your car insurance company and they do homeowners the multi polity discounts are usually rather attractive.

I think the primary thing to make sure in the policy language is to be sure that you have replacement cost coverage. That way if you house cost significantly more to rebuild at some future date, you'll be covered. Your possessions are usually covered at some percentage of the home value, just make sure that number seems reasonable if you had to replace everything. For anything of particular value, do an individual rider. Once you are moved in, walk through the house with a digital camera or camcorder and make a record of all the expensive stuff like stereos, Plasma TVs, etc. Then burn that to DVD and file it somewhere safe not in the house. It'll make your life much easier if you have a claim after a robbery.
posted by COD at 12:01 PM on May 10, 2007

I recommend making sure your policy covers your "other stuff" (not just the home itself) at replacement cost, as opposed to depreciated value.

I had a bicycle and accompanying gear stolen, and it's amazing how much things can add up. It was all covered less my deductible.

I haven't looked into whether things like laptops are covered, but if you're toting a 17" MacBook Pro or other high-dollar machine, you may want to see specifically if laptops are covered. You may need a "rider" like what is used for jewelry coverage.
posted by altcountryman at 12:04 PM on May 10, 2007

What the others said.
Plus...look into getting homeowner's insurance through the same company you have your car insurance through. You can often get some pretty good rates by having both with the same company.
posted by Thorzdad at 12:07 PM on May 10, 2007

What the others said

Plus what Thorzdad said

Plus, one thing my (local) agent suggested was to make sure the insurance will cover housing costs for you if your house is rendered unlivable (fire, flood, etc) while its being rebuilt. It is kind of like the rental car rider for your auto insurance. It was certainly something I never would have thought of.
posted by Wink Ricketts at 12:21 PM on May 10, 2007

Also make sure you have a savings account that *always* has at least your deductable in it. Nothing's worse that having to scrounge for that deductable on top of a tree going through your roof.
posted by teleri025 at 12:39 PM on May 10, 2007

Most policies are pretty much the same, written by corporate lawyers to comply with state law. That being said, go with a top name reputable company and talk to their local agent (like cosmicbandito said). I have generally had good experiences with Allstate, including a claim. They also give me a 10% discount for covering my cars too -- on both policies!

Homeowners policies do not cover damage from rising water, but you said you aren't in a floodplain so I guess don't worry. If you are in an area prone to seismic activity, look into earthquake coverage (but if you are someplace you would actually ever be at risk of making a claim, it will not be cheap). Double check that it covers actual replacement costs, pay attention to how much in the way of "furnishings" are covered (the "furnishings" don't necessarily have to be in your house. Laptop computer and iPod stolen from your car? That's covered under homeowners). If you have unusual things that need to be covered -- more than $5k worth of things like computers or artwork or jewelry -- you will need to buy an additional rider to cover those things. Safeware sells computer insurance for a very reasonable sum ($69/yr).

I think most decent agents will ask the right questions to make sure you are set up with what you need. Frankly, if they sell more bells and whistles they get more commission.
posted by ilsa at 12:54 PM on May 10, 2007

United Policyholders provides an excellent resource for answering this question. If you can afford it, get "full replacement coverage."
posted by ajr at 1:02 PM on May 10, 2007

Don't forget to ask about the discounts...AAA, AARP, Non-smoker, security system, "mature homeowner" etc.
posted by Gungho at 1:34 PM on May 10, 2007

We're not in a flood plain either (I don't think?) but we do have a sump pump, and got a rider to cover that. Also, we insured my jewelry with a separate company that provides money rather than a replacement.

I agree with the independent agent. A higher deductible will lower your premium, but we were glad to have the lower deductible when we found two serious problems the first 18 months. Our insurance company has been great -- it's Grange Insurance (not sure they cover your state). We get a discount becuase we have all of our insurance (house, two cars, and an umbrella) with them. The contractor who has worked a lt on our house recommends Grange, Cincinnati Insurance, and some of the other mid-sized outfits, sometimes over the larger companies, which tend to insure more people with higher risk. So when something bad happens (like a bad hurricane), they pull out of the area, or they raise rates for people outside the area. At least, that's how it was explained to me.

Best of luck!
posted by dpx.mfx at 5:23 PM on May 10, 2007

Congratulations!

You haven't mentioned where you live, but here in Florida, homeowner's insurance is brutally expensive right now (thanks hurricanes!). I am an insurance agent, but I am not your insurance agent, so YMMV here! There are a few things to think about - most of which are pretty much in line with what other people have already said.

I agree with the advice to go with a local agency. I work for a local branch of a big, national company, but our clients know us by name and come to us first. If you end up having snags or problems with your adjuster, your agent can often make things happen for you or smooth things over. He or she should also be the first person at your home in the event of a fire or other catastrophe. I work for a great one - make sure that yours has a good reputation in the community where you live.

Here is a rundown of the coverages that you will probably have/need, depending on your state, along with an explanation of each.

In an HO3 (regular homeowner's in the state of Florida - I don't know very much about other states but it's probably pretty similar):

- The dwelling coverage (that's the coverage that will be applied to your home itself) amount will most likely be calculated by a "replacement cost estimator", which will determine the amount of coverage you need. If your loan is higher than this amount, most companies will allow an extra percentage to bring it high enough.

- You will also have coverage for "other structures". This will cover things on the property like sheds, fences, swimming pools, Wally Wats, etc. This is usually a percentage of the Dwelling coverage (the percentage varies and is in addition to the Dwelling coverage).

- You will have personal contents coverage. This is generally 50% of the Dwelling coverage (some companies may allow you to alter this coverage). I explain it to my clients like this: If you were to turn your house over and shake it, your personal property/contents would be anything that may fall out. That's oversimplified, but essentially the best explanation. Make sure that you get replacement cost on this (replacement cost will ensure that if you have a loss, your stuff will be replaced at today's prices instead of being depreciated). If you have high end jewelry and furs, you may wish to schedule your high value belongings. Make sure that you ask about this if it applies to you.

- You will have liability coverage (either 100,000 or 300,000 in Florida). This will cover you in case someone (a delivery person, etc) injures themselves, sues, and wins.

- You will have guest medical liability (approx 1,000 or 2,000 in Florida, YMMV). This will come in handy if a guest injures themselves and you want to help with medical expenses.

- You will have deductibles (the amount that will be deducted before any claims are paid). In Florida, it generally starts at 2% of the Dwelling coverage for Hurricane (any named storm), and about $500 for All Other Perils (theft, fire, burglary, etc).

Pools with diving boards/slides are usually not covered. Having a trampoline on your property is a liability. They will likely also have a list of dogs that are not covered (in fact, animal liability in general is excluded). Exotic animals are generally not covered either. Make sure that your home is in good repair/nothing broken, etc.

These are the basics, but I am sure that (if you are not in Florida) there will be some variations where you live. I hope this is helpful - maybe you'll feel somewhat prepared - insurance can be confusing your first time around! Just be sure to ask a lot of questions. A good agent, even if you're on the phone with them, should be able to tell you anything that you need to know.

My email is in my profile if you have any questions! I can probably find out anything you need to know that is specific to the state where you live, if you need it, and I may be able to refer you to a local agent, if you need one!
posted by mewithoutyou at 7:46 PM on May 10, 2007

Just to clarify, you bought your first home (as in the purchase is past tense) and you don't have insurance yet?

Generally, most lenders require you to have insurance coverage starting the day the mortgage papers are signed at closing. Also, any lapse in your insurance coverage will result in ridiculous penalty fees from your lender, so keep up on it.

If you bought the home outright, get the insurance right away regardless. Enjoy your new home!
posted by shinynewnick at 8:32 PM on May 10, 2007