Carefully Review Homeowner’s Insurance Policies


A homeowner’s insurance policy is usually required when you obtain your home loan. However, it can be difficult to find an affordable insurance policy that covers all of your essential property. It is important that you thoroughly review insurance companies before making your decision.

One of the most important items to review before purchasing an insurance policy is the A.M. Best Rating of the company. The A.M. Best Financial Strength Rating evaluates a company’s ability to fulfill its insurance obligations based on its balance sheet strength, operating performance and business profile. Companies can receive anything from an F to an A++, but any score under a B+ is considered financially vulnerable and is generally not a good choice to insure your home.

You should also become familiar with the liability portion of the policies you are considering. Actual Cash Value (ACV) policies pay claims based upon the depreciated value of the item or items lost, leaving you partially liable. Replacement cost policies will pay the full cost required to replace the items.

Once you have chosen an insurance policy, you should continue to have your home appraised every five years. If additions are made or remodeling takes place, you will need to review and possibly upgrade your plan as well.

Be careful to avoid common mistakes. The first is having inaccuracies on your application. This is grounds for rejecting any claim which would leave you completely liable for all costs. Secondly, make sure your policy includes any detached structure such as a guest house, a barn, a workshop, or a garage. Finally, do not over-insure. You can save some money by insuring only those items and structures that need to be replaced.

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