Protecting Your Biggest Investment: Your Home
When you buy a home, your bank or mortgage financing company requires you to purchase homeowners insurance. Homeowners insurance helps protect you if your home gets damaged or destroyed.
Here are some things to think about before you buy homeowners insurance:
- Your policy should cover the cost of completely rebuilding your home at current construction costs.
- You may be required to purchase only enough homeowners insurance to cover the cost of your mortgage. If that's the case, you need to be sure you have enough insurance to pay to rebuild your home, too.
- Every policy protects you in the event someone is injured on your property. Most policies provide you with at least $100,000 in liability coverage, but you should consider having more—experts advise between $300,000 and $500,000.
- If you have other assets worth more than the largest amount of liability coverage included in your policy, consider purchasing an excess liability or umbrella policy to provide yourself with extra coverage. These policies are relatively inexpensive.
- You can protect yourself against rising construction costs by adding an inflation guard, which automatically adjusts when your policy is renewed.
- If you live in a flood zone, you'll be covered only if you purchase a separate flood insurance policy.
- Even if you've paid off your mortgage, you should consider keeping your homeowners insurance.
Ways to Save Money on Homeowners Insurance
When you shop for homeowners insurance, be sure to ask if you can lower your premium in any of these ways:
- Increase your deductible from $500 to $1,000.
- Install smoke detectors, dead-bolt locks, or a burglar alarm.
- Sprinkler systems, fire alarms, and burglar alarms monitored by your fire department, police department, or home security company may lower the cost of your policy.
- Purchase your homeowners and auto insurance policies from the same company, which may result in a loyalty discount.
Your home is probably the largest purchase you'll ever make. Having the right homeowners insurance can protect your most valuable asset.
The Prudential Insurance Company of America, Newark, NJ