Buying insurance can sometimes seem costly, but it is also something that a homeowner can’t afford to be without. In fact, in most cases where a mortgage exists on the property, the homeowner will be required to carry a minimum amount of coverage on the house. For your own benefit, you should be sure that you have an adequate amount of coverage in the unfortunate event of a disaster.
The first thing to consider when choosing how much coverage you need is to figure out what it would cost to build your house (not including the cost of land) if it had to be reconstructed from scratch, according to Insurance.FreeAdvice.com.
If you built your own home, do not assume that the amount it cost to build the structure several years ago would be the same as it is today. For example,if you built the home for $125,000 a decade ago and decided that $125,000 was sufficient coverage, a total loss payout of that amount will likely cover the cost of a far smaller house than what you have now. Speak to an expert in home construction and ask what it would take to build a replica of your home, then add a little to that for inflation in the coming years.
One of the most devastating things about the total loss of a home is often the destruction of its irreplaceable contents: family photos and videos, an antique table that has been passed down through generations, or maybe your child’s first baseball trophy. While these items cannot be replaced, many other items can be.
According to Insurance.FreeAdvice.com, you should take an inventory of items such as furniture, jewelry, electronics, paintings and expensive clothing such as jackets or furs, and take photos of these items. Burn the photos onto a CD and store the CD somewhere outside your home, or upload the photos to a photo storage website. Many insurance companies will assume the content value to be half of the total value of the house itself, which you may feel is too much or too little. Try to be accurate so that you can replace the majority of your contents without paying unnecessarily high deductibles.
In some cases you may want to include a portion of insurance coverage for temporary housing expenses. If your home is damaged by fire, flood or another weather event that renders it unlivable for a period of time, you should be able to rest easy knowing that the expense of a hotel, meals or other living expenses is covered.
Depending on the extent of damage to your home, you could be displaced for anywhere from a few days to several weeks until alternate housing is available. While this too will increase premiums, it also will ensure that your family will not suffer any excessive financial hardships if you are forced into this situation.
Personal excess liability insurance, also known as “umbrella” insurance, will protect your assets in the event of injuries to someone else on your property or judgments against you that are above what is built into your policy. If you have substantial assets, you may want to add $1 million or more of umbrella insurance that covers your home and automobiles in the event you are sued. According to MetLife, $1 million of umbrella insurance can cost as little as $200 per year.
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