Are You Buying Home Insurance You Don't Need?

Protecting your home is certainly important; this is where you and your family live and where your most of your personal possessions are kept. But the key to buying home insurance is to understand what type of insurance and level of protection you need.

What you are actually doing when you buy home insurance is assign the management of a problem that occurs with your property to a third party—the insurance company for a fee—the premium you pay. When damage occurs to your property, the amount of risk that you assume, or the deductible is paid before the insurance benefits begin. In many cases, if the deductible is high enough, it reduces the amount of claims a homeowner must file with their insurance company.

This is one of the important things to consider when you purchase home insurance. While it is good to carry a deductible that will cover the cost of a minor repair, you do not want to carry a deductible that is too high either. Statistics show that homeowners file one claim in five years o the average.

You are paying for home insurance to cover the average expected cost of damage to your home, to limit your financial loss and out-of-pocket expenses so keep your deductible reasonable enough were you will not pay more than you have to. The fact that a high deductible lowers your premium means more money in your bank account, but it raises your level of risk. A good rule of thumb is use the cost of a minor repair as the amount of deductible you carry. Then the smart thing to do is to keep a separate savings account just for these funds.

There are many homeowners who are over-insured; they purchase insurance that they don't need. For instance if a homeowner purchases a policy for protection of expensive jewelry, that means that the value of the jewelry that they own exceeds the coverage benefits of their basic policy. But many times homeowners fail to ask the crucial questions like: how much value in jewelry is covered by my basic policy or what is the minimum value of jewelry that I must have additional coverage to protect. What the insurance company considers "expensive' may not be the same as what you think. Another example is purchasing earthquake insurance when you live in a region that has never had an earthquake: avoid buying coverage you don't need.