Homeowner's Insurance: How Much Do You Need?
MADELEINE BRAND, host:
From NPR News, this is DAY TO DAY.
Most people know that when they buy a house, they need homeowners insurance. But they may not know what it covers or, more importantly, what it doesn't cover. I spoke about that with our personal finance contributor Michelle Singletary. She first explained how much homeowner's insurance costs.
MICHELLE SINGLETARY reporting:
The average cost varies really according to how much house you have, where you live - but say around about 4 or $500 a year for some homeowners. You know, 1,000 or more if you have a very expensive property. And in the case of a home, you are required to have homeowner's insurance by your lender.
BRAND: Can you shop around for different policies? Or do you have to buy from a specific insurance company?
SINGLETARY: Absolutely you should shop around. The insurance industry is going through a lot of changes right now, lots of claims out there. So they're, you know, fighting for your business. You absolutely should call several companies, get a quote for your property because that could save you a couple hundred dollars on your policy.
And the other thing is you want to look at the deductible. The higher the deductible, the less you're going to pay for the homeowners insurance. So, if you can do it, you know $1,000 deductible will bring your policy down quite a bit. But that also means that if you have a claim, you've got to put out that first thousand dollars. If that's too high for you, try for $500.
BRAND: And Michelle, do condo owners need homeowner's insurance?
SINGLETARY: Absolutely. As a condo owner you are a homeowner, so you need insurance. I think lots of condo owners or people who rent think that their landlord or the condo association covers them. But that covers the outside building, the common areas. Anything inside your condo is not covered by the association or the landlord, and so you do need homeowner's insurance just like someone who has a single family home.
BRAND: Now as we found out after Hurricane Katrina, it may not cover such things as natural disasters.
SINGLETARY: That's right. You need to check the fine print. For example, flooding. Homeowner's insurance basic policies don't cover that. You have to get special insurance for that. So you want to be sure that you look through your policy, and also that it covers all the things that you need.
If you say have furs or you have very expensive rings or things like that in your home, you want to be sure that that gets included in your policy and the insurance company knows about it. Take pictures of them, you want to try to put the receipts or evidence of these in a - perhaps a fireproof box or something to that extent so that if you do have to file a claim, you've got proof that you had these expensive items in your home.
BRAND: Now what about liability insurance? That is something separate?
SINGLETARY: That is something separate. If someone comes to your home and trips or falls - say a repairman - they could sue you. And you may consider getting more liability insurance if you choose to have a certain breed of dog, dogs that have shown aggressive behavior.
Now your basic homeowners policy covers a dog bite, but if your dog bites someone and you get sued, you know, that limit is going to range from about $100,000 to $300,000. So hopefully the claim is not more than that. But if it is you may not be covered.
BRAND: So, really, I didn't know about repairman and people visiting your property. So if the cable guy falls off my roof, then I could be liable?
SINGLETARY: You could be liable. Let's say you got these shaky stairs that you knew you should've fixed but you didn't, and someone comes to your home and they fall through them or injure themselves. You could be sued by that person.
BRAND: And the homeowner's insurance doesn't cover - you'd need the extra liability insurance.
SINGLETARY: You would need the extra liability insurance, yes.
BRAND: Michelle Singletary writes the syndicated column The Color of Money. And she's a regular guest on DAY TO DAY for discussions of personal finance. Michelle, thank you again.
SINGLETARY: You're welcome.
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