What to Look for in Homeowners Insurance

Few people can buy a house without homeowners insurance. Homeowners policies cover damage to houses and their contents from a variety of causes and protect owners if they're sued over accidents on their property. Even someone willing to go without that protection will still need a policy if they have a mortgage: Lenders insist on at least a minimal level of insurance to protect the house that serves as collateral for their loan. Function The most important thing to check is that the policy you're looking at will do what you need it to. Experts recommend having $300,000 in liability coverage, Investopedia states, and a replacement-value policy--which pays the cost of repairs or replacements up to the value of the policy--rather than cash value, which only covers the original cost, less depreciation. Some policies also cover living expenses if you have to rent a room elsewhere while your home is repaired. Limitations The standard HO-3 insurance policy usually covers your home's contents for up to 50 to 70 percent of the policy value, the Insurance Information Institute states: A $100,000 damage policy will cover $50,000 to $70,000 in contents. Some kinds of items such as jewelry, art, collectibles, fur and home office equipment won't be fully covered, however, unless you specifically ask for and pay for extra insurance. History If you take out a policy, you should have confidence that your insurer will pay when you have a legitimate claim. Different companies have different track records when it comes to settling claims promptly: Check with your state department of insurance to see which ones have a record of complaint against them. "Consumer Reports" magazine also publishes ratings for homeowners insurance companies and their performance. Size The fewer claims you make, the happier your company will be with you, the Nolo legal website states. Taking out the biggest deductible you can afford will reduce the number of small claims you make, and it should also lead to lower premiums. Potential Ask your insurer about discounts for basic home-safety precautions, CNN recommends: Smoke alarms, security alarms and deadbolts are among the steps you can take that many insurers will discount your premium for. If you buy life and auto insurance policies from the same company, you may be able to get a discount for that, too; it also gives the insurer an incentive not to cancel your policy if you make a claim.