Well, you’ve got this insurance policy to protect your home – and your bank account – in case a disaster happens. The thing is, there are a lot of different terms and vocab words in there that are confusing. Some of them are even attached to numbers – yikes. We’re going to explain three different insurance numbers you need to know about when dealing with your home insurance.
Three home insurance numbers you need to pay attention to.
1. Your premium.
You’re probably pretty concerned about this one.
Your home insurance premium is simply the price of the insurance policy. Your premium is your home insurance rate. It’s the agreed-upon amount that you pay for your specific insurance over a specific time.
Your premium depends on many different factors, which is why you have to go through the quoting process in order to find out how much you’ll end up paying for your home insurance. Some of the factors that affect the cost of home insurance are:
- Where you live
- The replacement cost of your home (more on this in a minute)
- Your claims history
- Your credit score
- How old the home is
- How close you are to a fire department.
- Your roof
- If you have a pool or trampoline
- Etc.
Wow. That’s a lot of things. These factors can make a difference to your rates. But before you start looking at your home insurance premium and just seeing dollar signs, remember that your insurance has a very important job: to safeguard your bank account from serious harm if there’s damage to your house.
Yes, home insurance premium might not be your favorite phrase, but it does mean that you’re purchasing a financial safety net. Still, if you’re looking to save money on your home insurance premium, our team can help. Get started with some quotes for great coverage at a great rate by giving us a call or filling out our online quote form.
2. Your limit of coverage.
You also have to be aware of your limit of coverage. The limit on your policy is the maximum amount of insurance that would be paid out for a covered loss. (Remember, not every loss is covered by your home insurance. Only certain perils are covered – there are exclusions that aren’t covered by home insurance.)
In short: Your limit is how much home insurance you’ve bought. Your insurance will tap out when the claim hits that limit. Any remaining costs would be on you.
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This is why it’s so important to make sure you have enough home insurance to completely cover the cost of rebuilding your home (because those costs could become very high very quickly.) This means insuring your home for its replacement cost, which takes into account the costs of building materials and the labor of the contractors.
You also have to check that you have enough insurance for your personal belongings. Your policy probably has a limit of coverage for all of your treasures, and you need to make sure the limit is high enough. You wouldn’t want to find yourself unable to replace all of the odds and ends, furniture, and other assorted treasures that live in your house. Taking a home inventory can help you find out what your limit of coverage for your belongings needs to be.
3. Your deductible.
Deduct-what now?
Your home insurance deductible is the amount of money you agree to pay if you have a claim.
Hold on – isn’t that what insurance is for, to pay for claims?
Stay with us.
Yes, your insurance is for claims and will help you out if your home gets squished by a tree or something like that. But you’re still responsible for paying a portion of the claim.
Let’s illustrate:
We’re going to pretend that you have a deductible of $1,000 (a pretty standard amount.) Then – and here’s the “yikes” part – we’re going to say that a tree falls over and crashes through your house. Aside from having a tree in your living room, you’re okay. Well, apart from the $7,000 worth of damage the tree caused.
What would happen is that you would end up paying $1,000 out of pocket and insurance would end up paying $6,000. (So, if it makes you feel better, they’re paying a good bit more money towards the claim.)
When you set your deductible, you have to consider how much you could comfortably afford to pay in the event of a claim. Also, consider the fact that you might get a lower home insurance premium if you set a higher deductible (because you’re less likely to file a claim.) Anyways, you have to balance your premium-deductible teeter-totter in a way that makes sense for your finances. You don’t want to set your deductible so high that it would be a huge burden to pay if you had a claim.
So, there you go – three new words to add to your insurance repertoire. Insurance can sometimes sound like a bunch of random words, but hopefully, these three will help decode some of the confusion.
And if you want to get some home insurance quotes so you can compare coverages and pricing (and save money on your home insurance) we would be happy to help. If you fill out our online quote form or give us a call, one of our agents will be here to help you get a great rate – and get the coverage you need to protect your home.