The ins and outs of homeowners insurance
Closing on a home is an exciting time for your home buying clients — but it's important that they don't lose sight of the steps they need to take to properly protect their investment.
Many homeowners might be surprised to learn the majority of homes in the U.S. may be underinsured.1 To help your clients make sure their home isn't one of them, share the following tips with them.
Know what the policy does and doesn't cover
Most policies do cover home damage sustained in the event of a fire, as well as theft of personal property — including from the homeowner's car. For some types of incidents, such as earthquakes, floods or hurricanes, clients may need to purchase additional coverage.
Understand the different types of policies
An actual cash value policy is one option for homeowners insurance, but it may not cover the full amount of what it would take to rebuild or repair their home. Depending on your clients' needs, they may want to consider replacement cost coverage, which covers repair and rebuilding costs even if they exceed the current market value of their home.
Within those two broad categories, there are two types of coverage:
- Named peril is less expensive but only covers what's listed, which means clients could end up footing the bill if the cause of any damage isn't explicitly called out.
- All risk policies cover any damage to a home that is not explicitly excluded — typically something along the lines of earthquakes.
Advise clients to record the contents of their home in digital photographs and store them in the cloud. That way, they have ready documentation when it comes time to replace any belongings that are lost, damaged or stolen.
Speaking of theft, let clients know that many insurance companies offer discounts if they install a monitored security system for their home.
Standard homeowners insurance policies usually provide personal property coverage, but only up to a certain percentage of the total loss. For this reason, if clients have expensive items such as fine art, jewelry or antiques, they may want to have the items appraised and then purchase an additional rider for them on their insurance policy.
Talk to an expert
For more information on what's covered in their policy — as well as what to insure, what an item's value might be or what kind of policy would suit you best — advise clients to consult with their insurance provider. You may want to have a few trusted referrals to provide to clients who are not yet insured.
1"What You Don't Know About Homeowners Insurance Could Cost You," ConsumerReports.org