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Buying the Right Homeowner's Policy

In the Nick of Time

Insuring for 100 percent of replacement costs should completely cover you in case of a loss, but it may not. For this reason, consider adding excess dwelling coverage to your policy. This will pay from 120 to 150 percent of the face value of your policy should you have to replace your home. It also covers building cost increases.

As mentioned in /home-management/home-maintenance/47858.html, it's important to buy a homeowner's policy with enough coverage to allow you to recover as fully as possible from disasters. There are lots of factors that you'll need to consider, starting with…

How much personal property you have to insure. This includes the value of your home and the value of your personal property. If you own a lot of nice jewelry, or you work out of your home, you should count on buying additional coverage.

How much personal liability insurance you feel you need. Standard levels are pretty wimpy, and it doesn't cost that much to bump up this coverage.

Additional endorsements for things like boats, aircraft, vans, etc.

In general, experts recommend that you buy enough insurance to allow you to completely rebuild your home. This amount is your home's replacement value. While it can be based on your home's market value or what you paid for it, it doesn't have to be and typically isn't. Insurance companies will sometimes require inspections to determine this value.

Homeowners typically underestimate the value of their personal belongings. This can really hurt should you lose everything in a fire or other disaster. For this reason, experts recommend doing a complete and thorough inventory of all household items and personal belongings. This should include the following:

  • Written description of each item. This should include what you paid for it, what you think it's worth, or how much you think it will cost to replace it. Keep a copy of this list stored somewhere else, such as a safe deposit box at your bank.

  • Photographs or videotape of all items. This is pretty easy in the digital age. Save everything to a memory card and store it off-site.

  • Receipts for all major purchases. Again, keep them somewhere else — a safe deposit box is ideal.

Doing this should also convince you to buy replacement-cost coverage. It does cost more, but it will replace items at their current cost, not at their depreciated value.

You can buy homeowner's insurance through an agent or directly through an insurance company. If you have questions about coverage, you might want to work with an insurance agent who can answer your questions and walk you through various policies and what they cover.

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Excerpted from The Complete Idiot's Guide to Common Household Disasters © 2005 by Paul Hayman and Sonia Weiss. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

To order this book visit Amazon's web site or call 1-800-253-6476.


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