Properly value your home

Know how much homeowners insurance to buy.

First, you need to determine the cost of rebuilding your home.

Insure your home for its replacement cost — that is, the amount it would cost to rebuild it if it were totally destroyed. That means determining the average local building cost in your region, and applying it to your home’s size, style, and quality of construction.

Your best resource for this is a builder. For a flat fee, you may be able to have a local contractor go through your home and provide an estimate. Try to find someone who builds individual, custom homes that don’t benefit from the economies of scale that tract homes offer.

If you want the same antique moldings, stone fireplace, and plaster-and-lathe walls as before, make sure the builder takes that into account. Otherwise, the estimate may reflect less costly modern materials.

You could also invite an insurance or real estate agent to your home. An agent who visits your home can eyeball the construction quality and point out any special features.

If you deal with a direct marketer (a company with no local agents), you can better ensure proper coverage by accurately reporting your home’s details — built-ins, antique wood, glasswork, upscale kitchen appliances, marble bath tile, etc.

Home insurance claims: When to make them

Homeowners insurance is a product you buy, but hope never to need.

The company you’ve paid to protect you can become your adversary.

While it’s the insurer’s job to restore you financially, it’s your job to prove your losses. And your perspective on what’s fair compensation won’t always jibe with your insurer’s.

Know when to hire help.

The more information you can provide on your claim, the more likely you’ll get what your due. If you’ve taken the steps outlined in this lesson, you shouldn’t need outside help in filing your claim. The insurer will send an adjuster to assess what was lost, stolen, or damaged, and offer a settlement to replace or rebuild. Independently, you should get three estimates from local contractors whose reputations you’ve researched.

But if you’ve faced a very big, traumatic loss and don’t feel confident going it alone, consider hiring a public adjuster licensed by your state to walk you through the process.

Typically, they take between 5% and 15% of the settlement. Because the public adjuster works for you, he or she has no obligation to reduce costs for the insurer.

Twelve states — Alabama, Alaska, Arkansas, Iowa, Kansas, Mississippi, Louisiana, North Dakota, South Dakota, Tennessee, Virginia, and Wisconsin — don’t have licensing laws that apply to public adjusters. But you can obtain the names of public adjusters in every state who have passed the voluntary certification process sponsored by the National Association of Public Insurance Adjusters.

Information is the best protection.

Whatever your claim, your best protection is to keep good records. Record your version of the event; take photos, if possible. Get the police report. Call your insurer as soon as you’re able, and keep notes of all related conversations.

Track resulting medical, home-care, baby-sitting, or housekeeping bills, since some policies cover a portion of those costs. Keep track of living expenses if you’re forced to live elsewhere temporarily.

Add this to your reading list.

Truth be told, you’ll be most satisfied with your settlement if you know in advance what’s covered. That means eyeballing your policy now. Pay particular attention to the exclusions section, which as the name implies, outlines what’s not covered.

Why subject yourself to such torture? An insurer’s definitions can make the difference between comfort and calamity. Check out the declarations page, which outlines the limits of your coverage. Coverage D of the homeowners policy, for instance, outlines how much an insurer will cover if you have to relocate temporarily. Does your insurer pay up to 10% of your home’s insured value, or offer to pay “reasonable” expenses over 12 to 24 months?

Finally, update your policies regularly. Inform your insurer of improvements and additions to your home — including redecoration — of $5,000 or more.

Home insurance: Maximizing your savings

Many homeowners discounts are available, but you have to ask for them.

You can’t change many of your risk factors. But you can save money by taking advantage of discounts that insurers offer for behavior that lowers your risk.

That could be anything from driving less than the average number of miles per year to quitting smoking.

Certain types of people — senior citizens, for instance — also are eligible for price cuts. You’ll also save by installing certain safety or protective equipment in your home.

There’s one catch: You have to ask. By one estimate, consumers lose some $300 million a year by not taking advantage of discounts.

Here are some other money-saving tactics:

Combine coverage. Because it’s cheaper to service two policies from the same customer, insurers often cut premiums up to 15% if you link auto and homeowners policies.

Sweat the small stuff. Frequent claims are red flags for insurers; some won’t renew policyholders with more than two claims in three years. So try to carry more of the risk by covering claims under $1,000.

Also: Try to boost your credit score. Many insurers give better rates to homeowners with good credit histories.

Getting the proper home insurance coverage

Here are some tips to help you make the right choices about homeowners insurance.

Just as there are different home styles, insurers offer a menu of different policies. For the majority of single-family homeowners, the most appropriate policy is the HO-3, sometimes called the special policy (in Texas, for some reason, it’s known as the HO-B). It insures all major perils, except flood, earthquake, war, and nuclear accident.

You’ll need deep coverage, up to and including 100% of your home’s replacement cost. By insuring at, say, 90%, you’re making the reasonable bet that your home won’t ever be a complete loss. That may be a reasonable bet bit if you want to play it safe, insure at 100%.

Insurers generally cover a home’s contents up to between 50% and 75% of the home’s value. Make a list of your home’s contents for a more exact estimate of your needs. That also provides a written record that’s useful when you file a claim. The industry-sponsored Insurance Information Institute provides useful instructions on how to put together an inventory.

You’ll also have to pick a deductible, which is the amount you pay yourself before the insurance kicks in. The higher you go, the more you’ll save.

Buy the guarantees

Traditional guaranteed replacement cost coverage promises to pay whatever it takes to rebuild your home, even if it costs more than the original limits you purchased. That’s crucial in the event that labor and building costs balloon after a major disaster. In many states, large insurers now cap the guarantee at 120% to 125% of purchased limits.

Your safest bet is to seek a company with no cap. However, if you’ve properly valued your home’s replacement cost, the caps shouldn’t scare you. It’s unlikely that building and labor costs will go up to more than 120% of your home’s insured value.

If it’s not built into your policy, ask for replacement cost coverage for your home’s contents. Without it, you’ll end up with just the depreciated value of any object that’s damaged or stolen.

Get these types of important coverage, too:

Inflation guard

This option annually increases your premium at the rate of local building-cost inflation.

Ordinance-and-law coverage

This rider, which covers the costs of bringing your home into compliance with current building codes, is a must if your home is more than a few years old.

Limit your liability

Your homeowners policy protects against lawsuits for accidents that happen on your property. It also covers you if your dog bites someone.

You might also consider umbrella liability coverage, which is additional coverage over and above your regular homeowners liability limits.

Consider these options:

–Displacement

Your homeowners policy also provides for living expenses if you’re displaced; replacement of structures such as garages and sheds; and limited medical coverage for someone injured on your property. Don’t buy more than the minimum offered. Depending on your situation, however, several other types of coverage may be worthwhile:

–Floods

Floods aren’t covered by ordinary homeowners insurance. Flood insurance is available through the Federal Emergency Management Agency. In California, you may need earthquake coverage; check with the California Earthquake Authority.

–Home business coverage

Business property worth more than $2,500 isn’t covered by a homeowners policy, so buy a separate policy — also known as a rider — to fill the gap. Business liability coverage must be purchased separately, too.

–Riders for valuables

A standard policy provides only minimal coverage for antiques, collectibles, furs, silver, jewels, cameras, computers, musical instruments, and firearms. For these, you need separate coverage.