I've just bought a house, and I'll need to bring a homeowner's insurance policy to the settlement table.
Since this is the third house I've owned, it should be a simple matter of calling my agent and simply duplicating the kind of coverage I've had for the other two houses. But since I've also decided to dump my present insurer after 11 years, I'm having to start from scratch.
I've decided to contact an independent agent who works with a variety of insurers rather than doing the legwork myself. That way, I'm dealing with a person who isn't beholden to a single insurer, and will, supposedly, be looking out for my interests and get me a good deal and the right policy.
But what should that policy look like?
I need a policy that offers a combination of coverage plans; one that protects me if the house is destroyed by fire or robbed of possessions; that protects me if someone slips on my front steps and sues me; and if some natural catastrophe strikes.
"Standard" policies typically cover houses and possessions from damage caused by fire, smoke, lightning, windstorms and hail, an explosion, rioting, vehicles and aircraft, theft, glass breakage, building collapse and the accident discharge of steam or water.
What if I'm away in the winter and the heat goes off, causing my water pipes to freeze and then thaw and burst? A standard policy also should take care of that.
Or there is sudden damage from artificially generated electric current -- such as that power surge that destroyed my computer hard drive (yes, I had a surge protector) and knocked out my alarm system.
"Dwelling" coverage repairs or rebuilds houses and attached structures, such as an attached garage.
"Other" structures include detached garages and sheds.
"Personal" property covers losses to furniture, clothing, appliances and most other possessions. "Special" items such as jewelry aren't covered and require additional coverage.
"Loss of use" -- which usually includes loss of rental income -- means that the coverage you buy will pay your living expenses if you can't live in the house because of a loss covered by the property.
Most standard homeowners' policies offer what is called "essential" coverage. Essential coverage includes liability, which protects you from loss for personal liability such as a lawsuit that might be filed against you. This includes coverage for bodily injury to others except for that caused by a car and property damage resulting from personal activity or conditions on your property.
The policy will pay up to $1,000 per person for those who are injured while on your property or as a result of your activities. These payments are made only to non-family members.
"Special" needs require special coverage. One is "guaranteed replacement cost protection" that will pay to have your house rebuilt or repaired at today's prices. There usually is no deduction for depreciation, even if the amount exceeds the limits in your policy. This is a good option in times of rising market values of houses and higher construction costs.
Because most policies cover losses of stolen or destroyed items for only the actual cash value of the item, you might want to consider a "personal property replacement cost option." With this option, you are covered for the repair or replacement of just about all of your personal property, without any deduction for depreciation.
An "inflation protection" endorsement increases coverage each year to help keep pace with inflation so that you won't find yourself underinsured over a period of time.
Essential and special coverage don't typically consider really valuable possessions, such as the "Star of India" knockoff in your jewelry box or the Picasso in the family room.
These require "scheduled personal-property endorsement," which means that the items are listed and insured for their appraised values for an additional premium payment.
When shopping for insurance, check to see what kind of discounts are available. Burglar, smoke and fire alarms and sprinkler systems will typically mean percentage discounts on your insurance bills, because such precautions mean that the insurer's risks are lower.
In some states, there are also discounts if you have both homeowners and auto insurance with the same company, or if you are 55 years and older, and especially if you haven't made a claim on your policy for at least five years.
If you have a newer house, a discount also may be available.
For details, sit down with your insurance broker to see what coverage you have -- and what additional coverage you want to consider.