Homeowner’s Insurance…Who Needs It?

The age-old question, of course, is a rhetorical one. And the simple answer is “anyone that owns a home or owns possessions in a home or apartment in which they reside.”

Long seen as a “necessary evil,” homeowner’s insurance is one of the many expenses in life that we may take for granted — even begrudge — until the unthinkable happens and we’re faced with loss through fire or other insured catastrophe. Naturally, if you have a home and a mortgage, your mortgage lender will require you to have homeowner’s insurance to protect their collateral during the life of your loan. But even if you don’t have a mortgage, it’s a smart idea to protect your investment with adequate insurance coverage.

How much insurance do I need?

The smartest thing you can do to best assess how much coverage you need is consult your local insurance professional. He or she can discuss topics such as replacement cost, recent improvements and other specific requirements in your particular market.

What’s the difference between replacement cost and actual cash value coverage?

Replacement cost coverage is the most common type of coverage. It pays to replace or repair your property. The insurance company will pay you the actual cash value until you repair or replace your property. Then they will reimburse you the difference.

Actual cash value coverage pays you the amount to replace or repair your property, minus how much the property has depreciated. For example, if you bought a piano for $2,500 five years ago and it was damaged in a fire, your policy would pay you the amount your piano is worth today, not the amount you paid for it.


Why is insurance coverage so expensive?

One simple word… risk. Insurance companies are in the business of assessing the risk they take in agreeing to insure an improved property such as a home or commercial building based on the likelihood — or potential likelihood — that a complete or partial loss will occur.

How can I save money?

Shopping for insurance is much like shopping for any other product or commodity. Price comparisons are important in this very competitive industry. And discounts are available many times, just for the asking. Many insurers provide discounts to reward behavior that reduces risk. So, don’t be afraid to ask.

Increasing your deductible (your out of pocket expense you may have to pay in the event of a claim) is one way to save money. But, be careful. Some consumers underestimate the financial impact of having to pay a higher deductible.

Peace of mind.

Simply put, homeowner’s insurance is both something you probably have to have as well as something you need to have. Your family’s home is one of the single largest investments you’ll probably ever make. So, the safety and protection of that investment is extremely important — at whatever the cost. The peace of mind in knowing that you’re financially covered in the unlikely, but possible, event of a fire or other disaster is definitely worth it. Can you imagine trying to sleep every night worrying what you would do if you and your family lost your home and other worldly possessions in a fire, with no insurance coverage?

And if you’ve had the same policy and company for many years, take some time to check in with your agent and make sure you’re still adequately covered. And if you feel you’re paying too much, shop around. Companies change their premiums periodically and you may just be able to save yourself a few dollars by making a couple of simple calls.