March 6, 2007

What should I be looking for in homeowners insurance besides fire and hazard coverage?

Shalonda, Washington

A good place to start is with our Home insurance basics to decide which type of insurance is right for your particular needs. A basic policy should also provide liability protection for incidents such as someone tripping and falling while on your property. In addition, if a covered peril should make your home uninhabitable, your policy should include a provision to pay the additional living expenses you incur when you have to temporarily live somewhere else. Other options to ask about include:

Cash or replacement value: You can insure your personal possessions for either the cash value or replacement cost. With cash value coverage, you receive the value of the item minus depreciation, while replacement value pays the current cost to replace the item.

Deductible amount: What level of deductible can you afford? A higher deducible can mean lower insurance premiums, but if something happens, be prepared to pay out that high amount.

Flood or earthquake: Most standard homeowners policies do not include coverage for either floods or earthquakes. If you live in an area where either may occur, consider adding coverage for either catastrophe, or both.

Floaters: Most policies set limits for items like jewelry, collectibles, and computers. If you own expensive items, you can pay extra premiums to have those items fully insured under what is called a floater. Without a floater, a policy will cover such items only under general categories and offer reimbursement for them up to a maximum of only a few thousand dollars (your policy limit will vary).

Discounts: Insurance companies offer an array of discounts. Factors that could bring down costs include smoke detectors, alarm systems, and deadbolt locks. Check out our story on Fifteen ways to save on your homeowners insurance for more details.

Finally, bear in mind that there are some things that insurance simply will not cover. For a light-hearted look at exceptions, read Home insurance exclusions: what your policy won't cover.

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Disclaimer: We are journalists, not financial planners or insurance brokers. Nothing we say should be interpreted as a recommendation to buy or sell any insurance product, or to provide other financial or legal advice.