Before making a final decision on your homeowners insurance, you should take the time to get to know the fundamentals of this type of insurance. If you are a first time home buyer, you may be completely unfamiliar with homeowners insurance policies, rates, and terms. It may also help to have a little nudge as to the best way to shop for cheaper rates.
Types of Policies
When shopping it is important to understand the various types of policies that are available to you. It depends upon your situation (renter vs. homeowner) as to which type of policy you will need.
- Broad Form: For townhouses and single-family dwellings and covers only listed perils to property.
- Special Form: For townhomes and single-family dwellings and covers all perils except those specifically excluded.
- Contents Broad Form: Covers the contents of your rented space, but not the property. Also known as renters insurance.
- Unit-Owners Form: Provides coverage for the owner of a condo’s personal property and portion of building that is owned.
- Modified Coverage Form: Covers older homes for the cash value of the home.
These are general types of policies that can be tailored to your specific needs and desires.
Factors in Determining Premiums
You may have thought it a big mystery as to how insurance companies calculate their rates. While each company is a little different, there are some common factors that will be used by all; they will simply carry a different weight with different companies. By knowing these factors, you can make some alterations to the policy or home buying decisions that will result in lower premiums.
Here are the most common factors in determining homeowners insurance rates.
- Type of home
- Age of home
- Location of home
- Coverage type
- Coverage riders/additions
The particular homeowners insurance company you select will determine which of the above variables are the most important in determining your rate. In addition, if your home is at a great risk for a specific peril, such as flooding, then that will be an overriding factor. In fact, for issues such as flooding, you will have to purchase a separate policy for that coverage in addition to standard homeowners insurance.
As you are shopping for the right insurance, you will come across some terms that you may not be familiar with or may not understand their implications to your policy. These policy variables will determine, in large part, the extent of your coverage, how your claims will be paid out, and the amount of the payouts.
- Actual cash value
- Replacement cost
Your policy will either pay out benefits based upon the actual cash value of property or the replacement cost of property. It is recommended, if you can afford the coverage, to go with replacement cost. Replacement cost will pay for all items to be replaced at what it costs to replace them, while actual cash value will only give you what the actual item was worth at the time it was damaged.
Other Items to Insure
When you think of homeowners insurance, probably the first thing that comes to mind is protecting the structure of your home. Homeowners insurance covers more than just the structure. It also can offer coverage for the following:
- Other structures (Garage, storage shed)
- Personal property (contents of home)
- Special collections (Coins, guns, artwork)
Liability insurance will provide you protection against lawsuits in case of injury to others or damage to others’ property for which you are liable. You can also get insurance for your pets through you homeowners insurance policy. If you have special collections that are very valuable, you will want them to be separate from your other personal contents of the home and you can insure them with a rider on your homeowners insurance policy.
To ease the strain and hassle of shopping for insurance, there are websites that allow you to fill out an online application form and get back multiple homeowners insurance rate quotes. These quotes are dependent upon you giving accurate information and are not binding, but they can give you a great idea of how much the insurance you seek will cost.
North Carolina homeowners insurance quotes are also a great way to save money. They allow you to easily, from the comfort of your own home or office, compare the rates of the most reputable homeowners insurance companies in North Carolina.