Homeowners, condo and renters insurance: 5 things to know

Homeowners insuranceWhether it's your first apartment, a starter home or a retirement condo, we can help you find a policy that protects your property - and most of your other important stuff, too. Home, condo and renters insurance takes the worry out of unexpected events, like falling trees, slippery sidewalks and break-ins.

Here are the five most important things to know as you compare prices and coverage:

1. You should buy enough home insurance to cover the cost of rebuilding.

One of the most common mistakes people make when shopping for home insurance is thinking the coverage should equal the home's market value. But home insurance is designed to pay for the cost to rebuild your home if it's destroyed. That amount might be lower or higher than what you paid for the house. In recent years many homeowners who lost homes in disasters found themselves caught short because they were underinsured.

A good home insurance agent can help you estimate, and it wouldn't hurt to ask a local contractor about building costs in your area. Online calculators to estimate the replacement cost are also available through services such as HMFacts and AccuCoverage.

2. Your landlord's insurance won't cover your stuff.

Don't expect the landlord to help you replace anything if disaster strikes. His insurance covers the building -- not your things. Buy renters insurance to protect your belongings in case they're stolen or damaged by fire or other perils. Like home insurance, renters insurance also provides liability coverage in case you unwittingly injure others or damage their property and are held responsible.

3. A good inventory is worth your time.

Conduct an inventory to find out how much coverage you need. Check whether your insurance company offers an inventory app, or use the Insurance Information Institute's free online software at KnowYourStuff.org to help catalog everything. Beware that standard home and renters insurance policies place dollar limits on coverage for valuables and special collections, so you might need to buy additional coverage for those items. Besides helping you determine how much coverage you need, an inventory helps the claims process go smoothly if something unfortunate happens.

4. Replacement cost coverage may be worth the extra expense.

Home and auto insurance bundlingReplacement cost coverage is pricier than actual cash value coverage, and here's why. With replacement cost coverage, the policy reimburses you to buy a new, comparable item to replace the one that was damaged. Actual cash value coverage pays you the current market value of the item that was damaged or destroyed. Say, for instance, a pipe burst and ruined a 5-year-old couch. Replacement cost coverage would pay for a new sofa. Actual cash value coverage would reimburse you for cost of a new sofa minus five years of depreciation.

5. A home or renters insurance policy doesn't cover everything.

Standard home and renters insurance policies do not cover damage from earthquakes or floods. You need to buy separate insurance policies for coverage in case either of those disasters strikes. Home and renters insurance also don't provide any liability coverage for business activities, even when the business is conducted from your home office. And they limit coverage for business-related property.

 

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