How To Avoid Paying Too Much For Your Home Insurance
Posted on: 7 September 2021
One part of being a homeowner with a mortgage is buying home insurance to protect the property. The lender is going to require home insurance until the mortgage is paid off. Even once you do that, it's still a great idea to retain your home insurance policy. However, you likely don't want to pay any more than you have to when protecting your home. Here are some tips that will help ensure you are not paying too much for your home insurance policy.
Pick The Right Deductible
The deductible is how much you pay before insurance starts paying for the rest, and you can have a very expensive deductible as part of your home insurance policy. The less you pay for a deductible will result in paying more for your insurance premiums, which can add up over time.
Many people pick a home insurance policy with a low deductible when they can afford to pay it. A low deductible may be based on a percentage of your home's policy value, such as 1%. For example, if you have a $300,000 home you will pay $3,000 for the deductible. If you have the money to pay that high deductible, then you can pick a high deductible plan. However, it may then not be worth it to use home insurance for minor repairs that cost less than your deductible.
Know The Replacement Cost
Many people confuse how much insurance they need for their replacement costs with their home's actual value. Know that the two values are not the same thing. You may have recently purchased your home for $250,000, but that does not mean that the replacement cost of the home is the same amount. It is likely going to be lower since you are also paying for the neighborhood that you are in and the land that the home is on.
Make sure that the policy you are purchasing covers the replacement value of your home, which would be how much it will cost to restore the home to its original state if there was a total loss scenario. For example, it can cover a house fire that required tearing down the home and starting from scratch.
If you base the replacement cost on the purchase cost, you will likely be paying for more home insurance than you need. This will result in paying higher premiums and insurance coverage that will never be used. For more information, contact a local home insurance service.
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