Homeowners Insurance: Frequently Asked Questions

• How can I get the "best buy" in homeowner's insurance?
• How much homeowner's insurance should I buy?
• How can I make sure my homeowners' insurance is adequate?
• How should I shop for a home insurer?
• How much of a homeowner's deductible should I have?
• Should I buy home and auto policies from the same company?
• Should insurance costs be a factor in the home purchase decision process?
• Should I insure the entire cost of the home including land?
• Does home security reduce insurance cost?
• Do home insurer's offer discounts for non-smokers?
• How often should I review my homeowner's policy?
• Should I buy private or governmental sponsored storm insurance?

The price you pay for homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from. Companies offer several types of discounts, but they don't offer the same discount or the same amount of discount in all states.

Be sure to ask your agent or company representative about any discounts available to you. Here are some money-saving steps to take when buying homeowners insurance. For more information on a particular item, click on it.

• Shop around
• Raise your deductibles
• Buy home and auto policies from the same company
• Check a homeís insurance cost prior to purchase
• Donít insure land
• Increase home security
• Stop smoking
• Check your policy once a year
• Compare private insurance and governmental plans

Insure For 100% of Rebuilding Costs

The amount of insurance you buy should be based on the cost of rebuilding, and not on the price of your home. The cost of rebuilding your house may be higher (or lower) than the price you paid for it or the price you could sell it for today.

Do You Have A Replacement Cost Policy?

Most policies cover replacement cost for structural damage, but check with your insurance agent to make sure your policy does so. A replacement cost policy will pay for the repair or replacement of damaged property with materials of similar kind and quality. The insurance company won't deduct for depreciationóthe decrease in value due to age, wear and tear, and other factors.

Find Out About Flood Insurance

If your home is in an area prone to flooding, contact your insurance agent or the Federal Insurance Administration at (800) 638-6620 and ask about the National Flood Insurance Program.

Check Your Policy And Keep Your Agent Informed

Make sure your agent knows about any improvements or additions to your house that have been made since you last discussed your insurance policy.

Look at your policy to see the maximum amount your insurance company would pay if your house was damaged and had to be rebuilt. The limits of the policy usually appear on the Declarations Page under Section 1, Coverage, Dwelling. Your insurance company will pay up to this amount to rebuild your home.

Contents Insurance: Make A List Of All Your Personal Possessions

This includes everything you and your household own in your home and in other buildings on the property, except your car and certain boats, which must be insured separately. Among the things you should include are indoor and outdoor furniture; appliances, stereos, computers and other electronic equipment; hobby materials and recreational equipment; china, linens, silverware and kitchen equipment; and jewelry, clothing and other personal belongings.

Check Your Policy for Special Limits

Check the limits on certain kinds of personal possessions, such as jewelry, silverware and furs.

This information is in Section 1, Personal Property, Special Limits of Liability. Some insurance companies also place a limit on what they'll pay for computers and other home office equipment.

If the limits are too low, consider buying a special personal property "endorsement" or "floater."

First, do some preliminary searching. Start making a list of insurers to call. Ask your friends about their insurers, check the Yellow Pages and call various insurers listed, or call your state insurance department. Also, check consumer guides. You can also check with your own agent.

This will give you an idea of price ranges and tell you which companies or agents have the lowest prices.

Tip: Don't consider price alone. The insurer you select should offer both a fair price and excellent service. Quality service may cost a bit more, but it provides added conveniences. Talking to insurers will give you a feel for the type of service they offer.

When talking to insurers, ask them what they would do to lower your costs. Once youíve narrowed your search to three companies, get price quotes.

Deductibles on homeowners policies typically start at $250. By increasing your deductible to $500, you could save up to 12 percent; $1,000, up to 24 %; $2,500, up to 30 %; and $5,000, up to 37 %, depending on your insurance company.

Some companies that sell homeowners, auto and liability coverage will take 5 to 15 percent off your premium if you buy two or more policies from them.

A new home's electrical system and plumbing, as well as its structure, are usually in better shape than those of an older house, so insurers may offer you a discount of 8 to 15 % for a new home. Check the homeís construction. Brick houses may result in less costly premiums in the East; frame houses are less costly in the West. Choosing wisely could cut your premium by 5 to 15 %.

Avoiding areas that are prone to floods can save you $400 or so a year for flood insurance. Does your town have full-time or volunteer fire service? And is the home close to a hydrant or fire station? The closer it is to these, the lower your premium will be.

Donít include the value of the land under your house in deciding how much homeowners insurance to buy. The land isn't at risk from theft, windstorm, fire or other disasters

You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm, or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police station or other monitoring facility. These systems are not inexpensive, and be aware that not every system qualifies for the discount.

Tip: Before you buy an alarm system, find out what kind your insurer recommends and how much you'd save on premiums.

Some insurers offer to reduce premiums if all the residents in a house don't smoke. Ask your insurer if this discount is available.

Compare the limits in your policy with the value of your possessions at least once a year, to make sure your policy covers major purchases or additions to your home.

Tip: On the other hand, you don't want to spend money for coverage you don't need. If your five-year-old fur coat is no longer worth the $20,000 you paid for it, reduce your floater and pocket the difference

If you live in a high-risk areaóe.g., one vulnerable to coastal storms, fires, or crimeóand have been buying your homeowners insurance through a government plan, you may find that there are steps you can take to allow you to buy insurance at a lower price in the private market. Check with your insurance agent.