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Buying
a home is one of the single largest investments
that most people ever make. If you need to protect
that investment, your main line of defense is
homeowners insurance. |
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Most standard homeowners insurance policies will
provide coverage for damage to your home (and
many of the items in your home) caused by:
Theft, Fire and lightening, smoke, Frozen
Pipes, Ice and snow. |
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Homeowners insurance also provides coverage
for liability claims, medical payments to third
parties, and legal costs if a lawsuit is brought
against you. The most common amount of liability
coverage included in a homeowners policy is
$100,000, but you may need much more, depending
on your circumstances.
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What's not
covered? |
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Read your homeowners insurance policy to find
out exactly what is and is not covered. Do this
before you suffer a loss, so you won't be surprised.
Most insurers exclude damages caused by an act
of war, nuclear accident, flood, earthquake,
and terrorism, although you may be able to purchase
special policies or endorsements that will cover
these events.
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A diamond is forever. Or is it?
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Most
homeowners insurance policies limit coverage for
certain high-priced or hard-to-replace items.
Additional endorsements or floaters will be necessary
to protect items like engagement rings, watches,
furs, antiques, and other valuables. You'll need
to have each item appraised. |
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Mortgage lenders require that borrowers purchase
a minimum amount of homeowners insurance (typically
equal to the appraised value or the purchase
price of the home). But this is often not the
amount of coverage you truly need. Instead,
find out how much it would cost to rebuild your
home, and consider insuring it for that amount.
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You get
what you pay for : |
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Are you willing to pay more to have damaged
personal property replaced? If so, consider
purchasing replacement cost coverage with your
homeowners insurance. When it comes to valuing
property, insurers generally use one of two
methods. The first, actual cash value, pays
you an amount equal to the replacement value
of the property, minus depreciation for the
years you owned the item. The second, replacement
cost, is more expensive, but it pays you the
full value of the item today, so that you can
replace the old item with a new one.
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How deep are your pockets?
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To save money, consider choosing a deductible
of $250, $500, or even $1,000. In the event
of a loss (e.g., water damage from a leaky roof),
you'll be required to pay this amount out of
your own pocket before your homeowners insurance
takes over, but in the meantime, you'll save
on premium charges.
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Sound the
alarm : |
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Don't forget to tell your insurer if you have
a home security system (e.g., fire, burglar,
emergency). Most insurers offer discounts for
such safety features. You may also qualify for
a lower insurance premium if you live near a
fire department or hydrant, own a newer home,
own a home built out of fire-resistant materials,
or get your auto insurance from the same company.
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Shop around
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Get quotes from several insurance companies
when shopping for homeowners insurance. But
remember, the lowest price does not always equal
the best deal. Compare the coverage each policy
offers, and check with your state's department
of insurance to make sure that each company
you're evaluating has a good reputation in the
industry.
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