Factors To Consider When Customizing Your Home Insurance Policy
The right home insurance policy can help you reconstruct your home or replace damaged or lost items. Customizing your policy for your circumstances is the best way to determine the right home insurance.
Below are the factors to consider when customizing your homeowner's insurance policy.
Your home's location determines some of its threats. For example:
- The location determines the risk of flooding and wildfires
- Some areas have lower crime rates than others
- A home near a fire station has a lower risk of fire damage than a comparable home without a nearby fire station
Evaluate these risks to help you determine your home's threat level. Increase your home insurance coverage for elevated threats.
At a minimum, your home insurance should reconstruct your home in case of total damage. Estimate your home's reconstruction cost as closely as possible and buy adequate coverage. Home reconstruction cost depends on different factors, such as the home's square footage, architecture, materials, and local labor costs.
If your home is not code compliant, the authorities require you to bring it up to code during reconstruction. Old homes are more likely to be out of code than newer homes. Evaluate your home and determine whether you need money to bring it up to code in case of damage. The nature of code issues determines how much you need to make your home code compliant.
Injury Risks to Third Parties
Your home insurance includes liability coverage compensating third parties that suffer injuries on or due to your property. Some homes have higher risks of third-party injuries than others do. For example, a home with a pet and a trampoline has a higher risk of pet bites or trampoline injuries. In such a case, buy liability coverage that includes such elevated risks.
Your emergency savings act as your self-funded insurance – the money can come to your rescue in case of loss. Consider a case where thieves break into your house and get away with a ten-thousand-dollar entertainment system. If you have adequate emergency savings, then you can replace the item even if your insurance policy only covers a percentage of the loss.
However, you might be out of luck if you don't have savings and your insurance coverage only pays part of the loss. Evaluate your emergency savings and savings history to determine whether you need to boost your insurance coverage to protect your home and its contents in its entirety.
Standard of Living
Lastly, consider your standard of living because your home insurance courage will pay your living expenses elsewhere during reconstruction if something damages your home. The compensation for additional living expenses might not match your standard of living, but it should not be too low. Ensure your coverage includes adequate additional living expenses.