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This whole craze about naming your price should not have extended to something as important as insurance. This is not a commodity like an airline ticket and you, as a layman, have no business making a decision on insurance coverages to save $12 a year. It's like a bad game of Russian Roulette. What are you losing for that $12? Let's say that you choose $100,000 in personal liability instead of $300,000 and that saves you $12. Then you have a claim where your dog bites a guest. Was $12 a fair trade for $200,000 less in coverage? I don't believe so! Please don't trade away coverages for pennies. Take the time to understand what each is and make an educated decision. Then negotiate based on the appropriate level of coverage.

When comparing homeowners insurance quotes, there are several factors that need to be addressed specifically:

1- how much is the dwelling (the house itself exclusive of the contents) insured for? Can you rebuild your home for this amount? With building costs skyrocketing nationwide, a house insured for $100,000 6 years ago may be underinsured because it would cost more than $100k to rebuild it. In New York, where we were located, the housing boom of 1999 through 2009 brought costs to unheard of levels. Just ten years ago, we had prices of $60,000 to double dormer a cape and now, our neighbor is spending near $200,000 to expand and dormer. That is more than most houses cost in half the country! Case in point- can you rebuild your house for the amount it is insured for? That's not something you can figure out, but your agent has industry standard tools that can accurately estimate the costs.

2- do you have jewelry, computers, furs, silverware, etc.? These items all have limited coverage on most policies. For example, some policies only cover $2000 in unscheduled (unscheduled means that you didn't supply an appraisal for each piece and list it separately on the policy for an additional premium per thousand dollars in coverage) jewelry. Let's say you own three watches and perhaps a few rings, the total value of which is $6000. If you only have $2000 in coverage, you will not be able to replace everything that was lost in a fire or robbery. The same goes for computers. All policies have a limit on personal computers. If you're a Mac user, think about how much you have invested between iphones, ipads, apple TV and your Imac or MacBook Pro. You can bet it's a lot more than what the policy comes with.

3- how much liability coverage is enough? That's a relative question and differs for each person. The difference between the minimum a company offers and the maximum isn't a huge difference in premium. There are two common arguments with regard to liability- one is that if you have $500,000 or perhaps $1,000,000 in coverage, the attorneys are more likely to bring a larger suit in the event of a claim. I once heard of a claim where at a 4th of July party, the host lit a rocket that took out a guest's eye. Guess how much they won?? The maximum the policy would pay. It wouldn't have mattered if the host had $50,000 or $5,000,000, chances are the guest was getting it all. Weigh the options, consult an attorney if necessary and make a decision. But above all, do not base it on whether you will save $22 by taking $100,000 in coverage instead of $300,000. Again, your agent can help with this one.

4- is replacement cost coverage on the dwelling and your personal property necessary? Without the coverage, you are stuck with the limits the policy offers. Here's an example in plain English. Let's say you didn't choose personal property replacement cost coverage because it was $61 more in premium annually. Now, the house burns to the ground and everyone was out at work when it happened. Without guaranteed replacement cost coverage on your contents, you will be getting the depreciated value of everything you owned that wasn't attached to a wall or scheduled. So if your couch was $1900 and is 5 years old, it is likely worth less than 50% of its original value so that's what you will be receiving. Imagine all of your socks, clothing, etc. that are used... then think of what they fetch at a garage sale. Pretty scary. Guaranteed replacement cost contents coverage on a homeowners policy is a gift as far as I'm concerned. Who else will replace all of your stuff with brand new for a few hundred dollars per year in premium (if you have homeowners insurance in Texas or Florida, you're likely paying a few grand- unfortunately)? Guaranteed replacement cost coverage on the dwelling requires that you insure it adequately in the first place, so don't think you can insure a $500,000 building for $90,000 and take the replacement cost coverage for an extra $18. The companies are smarter than that and have a stipulation regarding you insuring it properly in the first place thereby limiting their risk that they will have to pay more than you have insured the building for.

5- Finally, if you have a policy, be sure to compare the current coverages to those proposed by the company, agent or broker you solicit quotes from. Then ask if you are losing any coverages on the policy he or she is quoting. After reviewing any difference, ask if there are any optional coverage you should have that you currently don't. Here's a good one: my brother didn't have back up of sewers and drains coverage and of course the town sewer backed up forcing several inches of poisonous raw sewage through the basement shower drain. The ensuing cleanup cost him about $3500. He had to pay it out of pocket, then wait 6 months to be reimbursed by the town. Not a good position to be in. Problem is, if you don't ask about possible coverages, you'll never know that you are missing a valuable coverage. This is the problem with buying on price alone!

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