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How Much Insurance is Right?

A homeowner needs enough insurance to protect their house (not including the cost of land) and possessions. Here are some key factors to keep in mind when determining how much insurance might be needed.

  • Insure the home for what it would cost to rebuild it, not the mortgage amount or market value. A St. Johns insurance agent can work with customers to determine a home’s replacement value. One way to get a quick estimate is to multiply the total square footage of the home by local building costs per square foot. Bear in mind, however, considerations such as type of construction, improvements, special custom features, etc., are not reflected in a generic cost-per-square-foot estimate. Homeowners are encouraged to consult with their insurance agent who has access to resources used in calculating a home’s replacement value.
  • Don’t underestimate the value of belongings. Generally, homeowners’ policies give coverage for belongings that is equal to anywhere from 25% to 75% of the amount of insurance on a home. To decide what’s right for each individual homeowner, the insured are encouraged to compile a video or written inventory of everything they own that includes what it would cost to replace those items. Homeowners should consider insuring belongings on a replacement cost coverage basis. While it generally costs a little more, homeowners will be reimbursed for what it costs to replace the item with no deduction for depreciation if they do have a claim.
  • Procure adequate liability insurance. If someone is injured on a homeowner’s property and that homeowner is not properly insured, it could cost hundreds of thousands of dollars. Basic homeowners’ policies give you $100,000.00 worth of liability insurance. Increasing liability coverage to $300,000.00 or $500,000.00 is generally worth the relatively small increase in cost.
  • Look for a policy that covers the cost of building-code compliance. If a home needs to be repaired or replaced, the cost of improvements needed to comply with current building codes may not be covered by a standard homeowners’ policy.

How To Save Money

  • Go with the highest affordable deductible. A deductible is the amount of money a homeowner agrees to pay if there is a claim. The higher the deductible, the less the homeowner pays for insurance. A higher deductible can also help improve a homeowner’s claims history – since the owner, rather than the insurer, pay small claims. A good claim history saves the homeowner money.
  • Use window locks and deadbolts on exterior doors and windows. They reduce the risk of theft and can also reduce insurance costs.
  • Consider a burglar alarm system. If an alarm system isn’t already installed in the home, these burglar alarm systems can keep the home safer while also saving the homeowner money.
  • Be aware, if you are purchasing or remodeling a home, that Construction Type and Building Materials Impact Insurance Costs. If a homeowner is purchasing or remodeling a home, this is important to bear in mind. For example, masonry homes cost less to insure than frame houses, as do houses with hip roofs (roofs that have ends and sides that slope to the eaves line).
  • Consider Upgrading Electrical, Plumbing and Heating and Air Conditioning Systems in an older home. It may determine if the home is eligible for coverage.
  • Make the Home More Disaster-Resistant. Home items such as hurricane shutters, impact-resistant glass, and roofs connected to wall studs by hurricane straps provide greater protection for the home, which can result in insurance cost savings.
  • Install and Maintain Smoke Detectors. It may also be wise to think about installing a fire alarm that alerts the local fire department should there be a fire present in the home.
  • Be Careful Not to Overinsure. It is important that homeowners not confuse what they paid for their house with the cost of rebuilding it. A home should be insured for 100% of what it would cost to replace it. It should not include the value of the land. Homeowners should review their policy limits and the value of their possessions annually. While it is important that a policy protect improvements and purchases that have been made, homeowners obviously don’t want to spend money for insurance they do not need.
  • Take Advantage of Other Discounts. While they vary from company to company and state to state, there are discounts for new homes, homes in close proximity to a fire station or those located in gated communities, etc. Homeowners are encouraged to talk to a St. Johns agent about what’s available in their specific area.
  • Investigate insurance from a private insurer. If a homeowner is currently insured through a state plan, a private insurer’s plan may be able to reduce costs and provide better coverage.

Doing A Home Inventory

Unfortunately, it’s a situation that is all too common. When a home is burglarized or destroyed by fire or some other disaster, most homeowners are unable to make a list of all their belongings from memory. That’s why taking a home inventory is one of the most important things a homeowner can do… BEFORE disaster strikes. First of all, it helps ensure that a homeowner has the right amount of insurance protection. Even more important, having an up-to-date home inventory is the best way a homeowner can ensure they are paid quickly and fairly once filing a claim.

The idea of doing a home inventory can be intimidating – but it is a task that is well worth the effort.

Here are some tips for completing a thorough inventory:

  • Choose a method. There are a number of ways to complete a home inventory. Homeowners can videotape it, compile a written inventory with photos, or use one of a number of new home inventory computer programs.
  • Go room to room, paying attention not to forget the garage, attic or basement. Homeowners need to make a list of anything they would want replaced if it was destroyed. To keep the task manageable, it may be helpful to break this up – completing one room per week.
  • Update the inventory on an annual basis, adding new items and removing items that are no longer in the home. It is important to include any improvements recently made to the home, such as a kitchen renovation or new addition.
  • Store the inventory in a safe place away from the house. Homeowners who do not have access to a safety deposit box should consider storing copies with a friend or family member.

Information that a home inventory should include:

  • The name of each item along with a description and picture (Panasonic stereo, 32 pieces of china, wicker sofa, # of skirts, pants, shoes, etc.) Include everything from garden tools and luggage to mattresses and sports equipment.
  • Estimated purchase price as well as current and replacement value of the item and when and where it was purchased from (attach receipts if available).
  • On valuable items such as jewelry or antiques, attach a professional appraisal.
  • Make, model and serial number for major appliances or electronics.
  • Location of item (living room, garage, etc.). This can be valuable if there’s theft or damage in select areas of the home.

when Buying Or Remodeling A Home

The type and age of a home, how it is built, and where it is located can affect how much a homeowner pays for insurance. It can also impact how well a house will fare in severe weather or other natural disasters.

Whether buying a new home or renovating an existing one, here are some tips homeowners should keep in mind:

  • Location, location, location – Is the home close to water or on the coast? How far is it to the nearest fire station and water source? Chances are a homeowner will pay more for insurance when the home is located on the water or far away from a fire station. Is the home located in a flood zone? If it is, the homeowner will probably need to purchase an additional flood insurance policy.
  • Wall construction – Houses made of masonry or reinforced masonry withstand high winds better than wooden ones. In fact, insurance on wood frame homes can cost up to 10% more than brick or masonry homes.
  • Age matters – New homes generally cost less to insure than older ones. New electrical systems and more weather-resistant building codes and materials make them statistically less likely to be damaged from a storm or fire. Updated systems in an older home can also help keep insurance costs down.
  • Hip roofs (roofs that have ends and sides that slope to eaves line) are more stable in high winds than those with gables. Gabled roofs can be braced to provide more protection.
  • Roofs connected to wall studs by hurricane straps, wraps and clips are more secure than those attached by nails only. Connecting walls to the foundation provides greater support than relying on friction and gravity.
  • Impact-resistant glass and hurricane shutters provide protection against wind-borne debris.
  • Roofs with solid plywood sheathing, a secondary water barrier and impact-resistant shingles increase strength and durability.
  • Exterior structures such as decks and porches that are anchored to the house and ground are better able to withstand severe winds.
  • Overall condition – Cracks in walls or ceilings, obvious water damage or dampness can be signs of costly structural damage or needed repairs. Poor home maintenance (old roofs, broken windows, etc.) can also make it difficult to find a quality insurer willing to insure a home – until repairs are made.

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