Insurance World

For first time homeowners or for those who have never really taken a serious look at their Homeowners insurance, determining what Homeowners insurance coverage you need can be a trying time. One of the most important tips to keep in mind when determining what type and how much Homeowners insurance you need is to make this determination before you get started talking with an insurance agent.

It is extremely easy to get sucked into buying extra insurance that you will never use by a sly talking agent on the phone. This doesn’t mean that you shouldn’t take an insurance agent’s advice at all, but just be certain of a ballpark figure for the type of coverage and the amount of coverage you need and want before you get started.

One of the first questions an insurance agent will ask is the value of the home being purchased. This simply means the basic exterior and interior value of the home as it is when you purchase it, without belongings. Remember that an insurance agent should ask specific questions regarding the exterior of the house, such as whether it is brick, vinyl siding, wood or a mixture, as well as questions regarding a porch, deck or sunroom.

Insurance agents should also be asking specific questions regarding the basic appliances on the interior of the house, and will want to know how old the plumbing and electric system are, the air conditioning and heating unit, the appliances and will even ask questions about whether you have expensive countertops or flooring, such as granite or marble.

Keep in mind that while you purchased the home for a certain price, say $100,000, the Homeowners insurance company may want to allot payments for the structure of the house to be anywhere from $10,000 to $40,000 over the current appraisal and market value of the house, to deal with inflation. It is up to you to decide if you want to agree to these terms, but remember that the price of repairing these items in the home will increase over the years, and you don’t want to be left with not enough money from the insurance company to cover full replacement of your home at any given time.

If you have purchased a home that will soon be remodeled or reconstructed, you may want to go ahead and add a considerable amount to this portion of the insurance coverage, that way if anything happens in the process of remodeling or as soon as the home is remodeled the total cost of remodeling will be covered without a problem. Of course you can always wait until the remodeling is completed to call and get a new price quote, but it is best to have the insurance set in place prior to the completion of the remodeling.

The second major factor that should be considered in determining the amount of Homeowners coverage needed is the interior value of the goods in the home. This is a difficult task for some people who have not kept good receipts of purchases and that makes it easy for insurance agents to suggest more coverage than needed in the interior goods department.

Before calling for price quotes, it is best to sit down and try to briefly itemize the major purchases in your home, including furniture, large appliances, and electronics. Many basic interior coverage plans do not cover certain electronics such as computer systems or laptops, so be sure to ask about laptop or computer coverage if this is an item you have in your home. As well, some insurance policies will cover jewelry but others will require a separate “special” interior Homeowners policy, although adding this on would only cost approximately $30-$80 a year for most jewelry owners.

The final determination for how much coverage needed should be location. It is extremely important to consider whether you will need hurricane insurance, flood insurance, wind and hail damage insurance, or even tornado insurance.

Bear in mind that even if you live in a hurricane zone, you may also be required to purchase separate flood or wind insurance, in case your home floods or the windows blow out from the storm. The same goes for tornado or earthquake insurance, as you may be required to have separate amenities added to the policy to cover wind damage or even flooding.

Have you ever worked out how much you spend on insurance? Try totting up your premiums – we suspect you’ll be surprised! You’ll be even more surprised to discover that there’s a probability that you’ve also duplicated some of the cover you’re paying for. Cut the duplication out and you’re certain to save money.

Lots of people have insurance cover for legal expenses, loss of income, theft, even death, without even realising it. This can arise because many of us don’t fully understand what’s covered by the policies we have, especially if the policies had been arranged for us by financial advisers and brokers.

In a recent survey, The Financial Services Authority (FSA) discovered that optional extras such as breakdown recovery and legal expense cover, were frequently added to car insurance without checking whether the policyholder was already covered. It’s also not uncommon to find that people with Permanent Medical Insurance have duplicated their cover via payment protection policies taken out specifically to cover their monthly payments on mortgages, loans and credit cards. The point is that if they claim on their Permanent Medical Insurance, their payout will be reduced because part of their claim is also insured through their payment protection policies – so their payment protection insurance is really a waste of money.

The Financial Ombudsman has confirmed this saying, “People often contact us when they find themselves over-insured. They often do not realise until they make a claim that they have been paying for a policy that provides very little, if any, benefit”.

There’s also ample of evidence that some of us simply don’t understand what we’re actually insured for! For example, take the case of Amanda Lariviere from West Yorkshire. Amanda, aged 42 and mother of two, is recovering from ovarian cancer and had an allergic reaction to chemotherapy which kept her off work. Out of the blue she received an unwelcome tax bill so she decided to visit her building society to find out if she could raise some cash by re-mortgaging. The adviser at the Society wisely asked her to bring with her, her life insurance policies so that they could be used to support her re-mortgage application. So imagine Amanda’s surprise and delight when the adviser explained that her policies with Norwich Union and Scottish Provident, which had been costing her Ј80 per month, were not life insurance policies at all – they were actually critical illness policies with a combined insured value of Ј100,000. She was able to claim on these policies and the Ј100,000 she received was sufficient to pay off most of her mortgage and her tax bill!

Here’s some typical insurance policies to check out.

Critical Illness Insurance

Critical Illness insurance is often sold as an optional extra within a life insurance policy. In fact that’s usually the cheapest way to buy it. However, some enlightened employers already provide critical illness insurance as part of their employment package. Ask your employer if you are one of the lucky ones!

Life Insurance

Some employers also provide life insurance cover within their pension schemes. It’s called death-in-service benefit and typically pays out a tax-free lump sum worth 3 to 4 times the annual salary if the employee were to die whilst employed by the company.

Permanent Medical Insurance and Payment Protection Insurance

Permanent Medical Insurance (PMI) is also known by some people as Income Protection Insurance. PMI pays out the insured monthly sum if the policyholder is off work due to illness due to one of a wide range of specified illnesses - and some policies will even pay out during redundancy. PMI policies pay out indefinitely or at least until the policy comes to the end of its insured term.

Few appreciate is that PMI actually eliminates the need for Payment Protection insurance – the sort of insurance frequently sold alongside loans, credit cards and mortgages to maintain monthly payments if you are off sick, have an accident or are made redundant. Indeed, you can’t make a claim against more than one policy for the same event – only one policy will agree to pay out! (All the others will reduce their payouts to the value of the money you are receiving from your other policies)

Mobile Phone Insurance Normally mobile phone policies have a hefty excess – rarely less than Ј50. You could be better saving the insurance and changing to a pay-as-you-go plan.

Legal Expense Insurance

Insurance for legal expenses relating to disputes concerning your home will usually be included free of charge within your home and contents insurance policy. Most car insurance policies provide legal expense cover as an optional extra – others even include it as standard. Some trade unions and professional associations sometimes include access to legal advice as part of their service to their members. Check these out before you pay for more cover!

Insurance for ID Theft According to “Which”, the consumer magazine, you are only legally responsible for the first Ј50 if your identity is stolen. Is it worth insuring for a Ј50 risk? Incidentally, my bank has just given me this insurance for free!

Automatic cover for credit card purchases Many credit cards automatically insure your purchases for a set period of time after you’ve shopped. Barclaycard is a good example. If you used Barclaycard to buy something valued between Ј50 and Ј2,000, you’re insured against theft and accidental damage for the next 60 days.