6 Steps for Choosing the Right Homeowners Insurance

Moving into a new home is an exciting event. Less exciting, but critically important, is selecting a homeowners’ insurance policy to protect your new home and everything in it. Choosing the right policy to protect your home is invaluable in the event of theft or disaster. The key is to pick coverage that shields your home from the most likely threats in your area while keeping pace with rising construction costs.

The key is not only to protect your home and valuables, but also to find a company and an agent or broker who will provide excellent service and peace of mind. With more than 200 insurance providers to choose from in New York, that’s no simple task. The right insurance partner, however, will narrow your choices down to the one that best meets your specific needs.

To find the company and insurance partner that’s best for you, follow these six steps.

Understand the Three Forms of Insurance Coverage

Insurance in the New York area typically comes in three tiers of coverage, though homeowners can somewhat customize coverage based on their needs.

Basic Form Coverage

As the name suggests, Basic Form coverage provides basic protection against common, named perils, such as fire, burglary, vandalism, physical injury, property damage, etc.

Broad Form Coverage

Broad Form coverage will provide more extensive coverage. In addition to the named perils in Basic Form policies, this tier includes perils such as water damage, falling objects, etc. Keep in mind that Broad Form coverage is also a named-perils policy. If the issue isn’t listed, then it isn’t covered.

Special Form Coverage

Special Form coverage offers the best protection against all risks—unless specifically excluded, like floods, earthquakes, and backup of sewers and drains. Obviously, earthquake threats, for example, are a minor concern here in the Northeast, but flood coverage will be a more important consideration.

Customize Your Insurance with Supplemental Policies

Supplemental policies, also known as riders or floaters, help homeowners avoid gaps in coverage by adding more protection for expensive property, such as art, jewelry and high-end electronics. Riders are ideal when you have a valuable item that’s worth more than what the standard coverage will pay.

For example, a $10,000 painting won’t be fully covered by a standard policy that might only cover $3,000 of the loss. A rider would allow you to cover most or all of the loss. Buying a rider instead of a separate policy can be considerably less expensive.

Learn What Protection Homeowners Insurance Offers

Homeowners insurance protects more than your home. A policy actually offers five types of protection.

1. Dwelling Coverage. This helps pay to repair or replace the physical structure of your home if its damaged by a covered peril, such as a fire.
2. Other Structures Coverage. This helps pay for repairs or replacement of structures on your property that aren’t attached to your home. Typically, these are sheds, garages, fences, and other outbuildings.
3. Personal Property Coverage. This is coverage for your personal property coverage, aka your stuff: furniture, clothing, electronics, etc., against covered perils. In many cases, your belongings are also covered when you’re not at home, such as items stolen from your vehicle. Note that many high-value items, such as jewelry and artwork, will require additional coverage, as mentioned above.
4. Liability Coverage. If a guest, delivery person, or other visitor is injured at your home and you’re found legally responsible, this coverage may help cover expenses such as medical bills or legal costs.
5. Additional Living Expenses. If you can’t live in your home because of damage from a covered event, some policies may pay relocation costs temporarily while your home is repaired or rebuilt.

Note that the amount of coverage a policy offers in each of these areas can sometimes be customized. A knowledgeable agent or broker can help with those decisions.

Choose Replacement Cost Coverage

Insurance companies generally use one of two methods for establishing the value of insured property at claim time. One of them is by far the smarter choice.

Actual cash value (ACV) pays claims based on the depreciated value of an asset, which can be much lower than replacement cost. The current market value of a ten-year-old television probably won’t go very far toward purchasing a new one.

Replacement cost value (RCV) means that the insurance company will repair or replace the damaged property without deducting for appreciation. That may or may not be the amount you paid for it, but it will be the amount needed to purchase a new, comparable item. However, you’ll still be responsible for covering the deductible.

Some home insurance policies offer guaranteed replacement cost coverage, which covers the cost of repairing or replacing your home after a covered loss—even if the amount exceeds your policy limit. Even if you opt for this protection, you’ll want to meet with your insurance partner on an annual basis to make sure you have the right coverage, especially if you’ve made any significant improvements or other alterations to your property.

Consider Purchasing Flood Insurance

You might not think of flooding in your area, but 99% of U.S. counties have been affected by flooding since 1996, according to Federal Emergency Management Agency (FEMA) statistics. Even if you perceive your flood risk as low, you may regret not being covered for a broken water main or torrential rain and wind, like with Hurricane Sandy.

You have two options for flood insurance: the federal National Flood Insurance Program or the private marketplace. An insurance partner who has experience with flood insurance can help you find the right policy for your needs.

One thing to remember is that the federal insurance program uses rates set by the federal government, not individual companies. Flood insurance purchased through the federal program will cost approximately the same amount, no matter which agent or broker you choose.

Work with an Independent Insurance Broker

Once you know what you need, seek quotes from multiple home insurers. There is no cost to shop around, and it’s the best way to find the right coverage at the right price. As you probably know from seemingly endless TV commercials, bundling home and auto policies, for example, can provide significant savings on both.

Your best bet, however, might be to contact an insurance broker.

An insurance agent typically represents one company, which limits your options. An insurance broker represents multiple companies and can help you choose the policy and company that offers the best combination of coverage, premium and service for your specific situation.

Like getting quotes from insurers, brokers don’t charge you money for obtaining quotes; insurance companies pay their commissions. Brokers will do the heavy lifting of finding the best quotes and coverage possible and will help you to determine deductibles, coverage limits, etc.

If you have any questions about homeowners insurance or your current insurance policy, or if you would like a free insurance review, please call us at 877-576-5200.