#1 Everyone should have home/renters insurance
Homeowners need to purchase home insurance to protect their homes and personal property in the event of a loss caused by a covered peril such as fire, wind, hail, water, theft etc. When financing a home through a financial institution they will require you to have coverage in place to protect the loan in case of a total loss. Be sure to begin your home insurance search well before your closing date is scheduled. Those who rent also need renters insurance to protect their personal belongings. In addition, everyone should seek protection against liability for accidents which may cause an injury to other people or damage to their property.
#2 Decide how much coverage you need
When preparing quotes, agents will use Replacement Cost Estimators to determine how much it will cost to rebuild you home in the event of a total loss. In most cases, your lender will want you to purchase a policy which covers at least the amount of your mortgage. It is important to remember, the amount of coverage you purchase for your house and contents will factor into your annual premium amount.
#3 Replacement Cost vs Actual Cash Value
Depending on certain circumstances, you may have the option to insure your home and belongings for either replacement cost or actual cash value. Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality with today’s material and construction costs. It is important to insure your home for at least 80% of its replacement value. Actual Cash Value (ACV) is the amount it would take to repair damage to your home after depreciation is considered. ACV policies may be less in premium, but you may not get the payout you want to fix damage to the home.