What factors should I consider when purchasing homeowners insurance?

Here are a few things you should consider when you purchase homeowners insurance.

  1. One of the most important things to consider is how much it would cost to replace your home.  Most companies require that you insure your home for 100% of its replacement cost. The replacement cost is different than the purchase price or the tax assessed value.  In the event of a loss, some companies may apply a co-insurance penalty if you underinsure your home.
  2. Determine the amount of property insurance coverage that you need to cover your personal belongings.  Many companies automatically extend a certain percentage of the dwelling amount to personal property. This may or may not be increased/decreased depending on the company.
  3. Determine the amount of personal liability coverage that you need. Choosing higher limits such as $500,000 or $1,000,000 is usually a bargain as the cost is very minimal.
  4. Determine any additional endorsements you may want to add to your policy. For example, do you want the personal property replacement cost endorsement or earthquake coverage?
  5. Homeowner policies have maximum limits for some specific categories such as jewelry, furs, fine arts etc. If you own property in these categories, you may want to consider insuring them separately