3 Things to Consider When Obtaining Homeowner’s Insurance


There are lots of companies that would love to sell you “premium” homeowner’s insurance with all the bells and whistles. While there are things that you can add to your basic HO-3 policy, most homeowner’s insurance policies are pretty similar. The following 3 items are some things to consider when making your decision on which company to use for protecting your home.

1. Dwelling amount and extended coverage. The dwelling amount is how much the insurance company thinks it would cost to rebuild the home. Most companies use their own calculations to determine that amount. This varies from company to company, but many have extended replacement or guaranteed replacement which increases coverage in case of total loss. For example, one company may have $100,000 with no extended replacement coverage and another could have $90,000 with 125% extended replacement coverage. The company with the extended replacement would have more coverage at $112,500. Now if there is a total loss of the home, that doesn’t mean you get a check for the extended replacement amount. It just means you have up to that amount to rebuild the home. In other words, if it costs $85,000 to rebuild the home, that’s how much either of the companies in the scenario above would pay. A higher dwelling amount doesn’t necessarily mean it’s a better policy. Use your good judgment in determining how much it would take to replace the home.

2. Personal liability coverage. This coverage protects you from personal liability exposures (i.e. injuries that occur on your property for which you are held liable). There are companies that quote you at the lowest possible amount to make their quote appear lower than others. Most companies have limits of $100,000, $300,000, and $500,000. When comparing quotes, make sure you take a look at the amount of personal liability. We would recommend carrying at least $300,000 of personal liability coverage.

3. Deductible. The deductible is the amount you would have to come out of pocket before the insurance company pays in case of a loss. On homeowner’s insurance policies the deductibles are usually $500, $1,000, or $2,500. Make sure you are comparing equal deductibles before you make your decision.

A standard HO-3 policy is pretty similar no matter which company you choose. Pay close attention to the dwelling amount, personal liability coverage, and the deductible before making your buying decision.

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