What should I consider when acquiring or evaluating homeowner's insurance?

Homeowner's insurance covers property - including the home, other structures, personal property, and general contents of the dwelling against theft or destruction. Renter's insurance protects the personal possessions of the tenant. These policies also offer some liability protection in the event, for example, that someone has a problem navigating the stairs in your home.

Important matters to consider.

  • In addition to the basic coverage, consider obtaining replacement cost coverage for your personal possessions and, in the case of homeowner's insurance, the home itself, if structural replacement cost is not automatically included in your policy. Construction costs are rising, so be sure your homeowner's insurance coverage keeps pace, whether you have a mortgage or not.
  • With regard to your personal possessions, replacement cost coverage will generally pay to replace lost, stolen, or damaged items rather than giving you their depreciated value.
  • Strict policy limits apply to valuable possessions. Any valuables should be appraised so that a floater policy can be added. Valuables stored in a safe deposit box should be insured as well.
  • If you're in an area that is prone to such calamities, obtain flood and/or earthquake insurance. Few people who suffer from these calamities have sufficient coverage, if they have any coverage at all. If you're at all in peril, and many regions of the country are, obtaining this coverage should help you sleep better at night and just might avoid a financial calamity. Here's another suggestion if you reside in a hurricane prone area: Read your homeowner's insurance policy carefully to see how much coverage it offers for hurricanes. Many policies provide less coverage for hurricane damage than they do for losses from other causes, so you may need to improve the coverage.
  • If you're a renter, don't go without renter's insurance. Consider the impact on your financial situation of losing all of your personal possessions. It happens to people every day.