Key Takeaways

• Ensure the policy includes essential coverages such as dwelling, personal property, liability, and additional living expenses.
• Review the policy’s coverage limits to confirm they meet your needs.
• Evaluate deductible options to balance affordability with potential out-of-pocket costs.
• Consider additional protection, like flood or earthquake insurance, based on your location and risks.

One in twenty homeowners file home insurance claims each year. While you might not file one this year, there’s a chance you will experience damages in the future. If so, you might need to file a claim.

That’s why you need a good homeowners insurance policy. As you can imagine, homeowners insurance policies aren’t all the same. Some offer more coverage than others, but you get to choose a policy based on what you believe is right for you.

So, what should you look for in your home insurance plan? How can you know if you have the right coverage?

Keep reading this guide to learn about the top six things to look for in a quality homeowners insurance policy.

1. High-Enough Structural Coverage

Failing to keep an active policy is dangerous, but not having enough coverage is also a bad idea.

Many people choose their structural coverage amounts for their homeowners insurance policies by looking at their mortgage balances.

While your mortgage balance reveals how much you owe on the house, it doesn’t tell you your home’s value. A good policy will include enough structural coverage to rebuild your home if necessary.

Therefore, you should review the structural coverage in your policy to ensure that it’s high enough to cover replacing your home if you lose the entire house.

2. Content Coverage

Second, a good homeowners insurance policy should offer plenty of content coverage. Content coverage refers to your personal belongings, including furniture, clothing, and decorations.

Imagine losing your house and having no coverage for your contents. Yes, you’d receive money to rebuild your home, but you wouldn’t have compensation for your belongings.

Review your home insurance policy to confirm that you have content coverage. You should also consider how much content coverage you need.

Many insurance companies use a percentage to calculate how much content coverage to add. So, for example, your insurance agent might suggest 40% to 60% of your home’s structural coverage for content coverage.

3. Replacement Cost Coverage

Another thing to look for with your homeowner’s insurance coverage is how they calculate claims. For example, an insurance agency might use the actual cash value (ACV) or the replacement cost method.

The ACV method compensates you for the actual value of your things after filing a claim, including depreciation.

The replacement cost method compensates you for the cost of replacing the items you lose. This method is preferred, as it provides more compensation to you after filing a claim.

If your policy uses the ACV method, ask your insurance agent about switching. Changing to the replacement method might cost more, but you’ll have more coverage.

4. Includes Appropriate Riders

The next thing to look for is riders. An insurance rider might go by a different name, such as endorsement or floater, but these are all the same thing.

An insurance rider lets you add coverage to things your policy doesn’t cover. For example, do you have an expensive guitar worth $10,000? If so, your regular policy won’t cover this if you lose this item from a covered peril.

But, even though your policy doesn’t cover it, you might want to add coverage for it. Fortunately, you can do this with a rider. In fact, you can add as many riders as you need to have all the necessary coverage.

Most homeowners insurance plans let you add riders. However, you can ask your agent about this if you have questions.

5. Affordable Deductible

Homeowners insurance coverage should also come with an affordable deductible. A deductible is something you’ll find with most insurance policies, and it tells you how much you must pay with claims.

For example, you might have a $500 deductible, which means you pay the first $500 of repairs when filing a claim. Of course, you can choose a higher amount if you prefer.

You should know that your deductible affects your premiums. For example, you’ll save money on premiums with a higher amount, while you’ll pay more for a lower amount.

You can choose from different insurance options when picking your deductible.

6. Covers Necessary Perils

The last thing to look for in a home insurance policy is the perils it covers. A typical home insurance plan won’t cover every peril you could encounter, but it should cover some basic ones.

For example, it might cover damages from wind, storms, hail, and water. Your policy should also cover damages from vandalism and theft.

However, it might not cover flood or earthquake damage. You can purchase additional policies to protect against the perils your policy excludes.

Update Your Homeowners Insurance Policy

You can update your homeowner’s insurance policy whenever you want to change your coverage. You can do this by contacting your insurance company or a different company.

If you need help finding the right coverage, Central Jersey Insurance Associates is here for you. We’ll work on getting you the right coverage for the lowest price possible. We’d love to give you a free quote, so contact us today!

FAQs

1. What coverage should be included in a standard homeowners insurance policy?

A standard homeowners insurance policy typically includes dwelling coverage (for the structure of your home), personal property coverage (for belongings inside the home), liability coverage (in case someone is injured on your property), and additional living expenses coverage (if you’re temporarily displaced due to damage). Optional add-ons like flood or earthquake insurance may also be needed depending on your location.

2. How do I know if my personal property is fully covered?

When reviewing your policy, check if it includes replacement cost or actual cash value for personal property. Replacement cost covers the full cost to replace your belongings, while actual cash value accounts for depreciation, which may leave you with less coverage.

3. What should I consider when choosing a deductible for homeowners insurance?

When selecting a deductible, consider your ability to pay out-of-pocket in the event of a claim. A higher deductible generally lowers your premium, but you’ll need to ensure you can comfortably cover the cost if damage occurs, especially in cases of major loss like fire or storm damage.