Have you thought about your homeowners insurance lately? Chances are that unless you have made a recent claim, you probably haven’t given it much consideration. If you are like most homeowners, you probably think that your homeowners policy is a “set-it and forget-it” item. Maybe it’s time for a homeowners insurance tune-up to make sure you’re protected.
Unfortunately, most homeowners do not really know too much about their homeowners policy until it’s needed, and it’s only when they make a claim they are surprised to know about the limitations of their policy. In fact, United Policy Holders (uphelp.org) states that about two-thirds of homes are underinsured by an average of 18%! (United Policy Holders is a non-profit whose mission is to be a trustworthy and useful information resource and an effective voice for consumers of all types of insurance in all 50 states). Besides the many underinsured homes, many homeowners are surprised to find out about policy exclusions when they make a claim.
Although it may seem unfortunate, it is not unusual for homebuyers to underinsure at the time of purchase to help save on their closing costs. They either believe they will upgrade their policy at a later date, and/or believe that they will never have to make a claim. This is especially true for first-time home buyers, who are most vulnerable and rely on their Realtor and loan officer for advice.
To help homeowners understand and choose their policy coverage, the Maryland Insurance Administration publishes A Consumer Guide to Homeowners Insurance (insurance.maryland.gov). First, understand the purpose of homeowners insurance is to help you recover from the financial effects of a loss that is covered by your policy. Additionally, a homeowners policy may “help protect you if someone is hurt or has their property damaged because of something you do or if something that you own hurts someone else or damages their property.”
According to The Guide, there are a number of types of homeowners insurance. To save money, many homeowners opt for a specific hazard policy that meets the requirements of their mortgage lender. Nonetheless, they may not realize that their coverage is severely limited, and likely underinsures their home. However, there are broad coverage policies that are more comprehensive.
The price of a homeowners policy is not fixed. There are many considerations that go into the pricing. For example, your insurance company will investigate if you have a history of making insurance claims. They will also research your home’s claim history through a CLUE (comprehensive loss underwriting exchange) report or an equivalent. Other considerations include (but are not limited to) age and construction of your home, the access to and quality of local fire protection, amount of coverage and deductible.
One way to possibly save on your homeowners insurance is to adjust your deductible. A deductible is an out of pocket expense that is required from you when you make a claim. Typically, the lower the deductible, the more expensive the policy.
Take the time for a homeowners policy “checkup” with your insurance agent. Review your coverage and make adjustments as needed to protect you and your home. The Maryland Insurance Administration’s Consumer Guide recommends that you read the Declaration Page as well as your policy to make sure you have the coverages and amounts you requested. Because your valuables coverage may be limited or excluded, you may need additional coverages or policies. Also, consider purchasing a separate flood insurance policy.
Dan Krell is a Realtor® with RE/MAX Success in Potomac, MD. You can access more information at www.DanKrell.com