If you own a house, you know that apart from the joy you derive from knowing there is a little corner of the world that belongs to you and serves as your refuge at the end of the day, there are also seemingly endless matters you need to keep track of in order to properly maintain and safeguard your home.
From an insurance perspective, home insurance is one of the most important decisions you will make when it comes to planning for accidents and unforeseen circumstances that can result in costly issues. BRZ works with some of the best home insurance companies to provide you with comprehensive coverage at competitive prices so that you can focus on the more pleasant aspects of homeownership, whether you are just starting to browse prospective properties or you have been a homeowner for a long time.
In either case, your best bet is to always tailor your coverage to meet your lifestyle and to update it every time you make important decisions in order to avoid unpleasant surprises down the road. Read on for five factors you should keep in mind regarding home insurance coverages:
1 - Always check the replacement cost of your home
And verify that you have either replacement cost or actual cash value insurance, depending on your circumstances:
Replacement cost will include the labor and material cost for rebuilding your house from scratch in the devastating case of total loss. The benefit of using this method to confirm you have adequate coverage versus simply looking at your home’s cash value is that in the off chance you find yourself in the harrowing position of dealing with a major catastrophe, your policy limit will accurately reflect current prices and replacement costs so that you are not financially burdened in the aftermath by having to cover the difference.
- Actual cash value, as the name suggests, refers to the monetary value attached to your home. It differs from replacement cost because it does not take into consideration how much it would set you back to replace your home with a brand new one but rather looks at the depreciated value of your home. As time passes, most possessions lose value so the advancing age of your home will influence the amount you would be paid in case it was destroyed since you will receive an amount equal to the cost of the house minus depreciation.
- Replacement cost insurance is a strategic choice for most homeowners, however, if you have significant savings or assets or if you are insuring a secondary residence or vacation home, you might be more comfortable taking your chances with an actual cash value policy.
- If you like being extra cautious, you may also consider extended or guaranteed replacement cost coverage which can extend your policy’s limit by a certain percentage if extra funds end up being required to restore your home to its original state after calamity.
2 - Are you planning any home upgrades this year?
As exciting as it is to make improvements or additions to your abode, before you press ahead double-check how they may affect your homeowners insurance premium. Whether you are adding square footage, renovating that sixties-era bathroom, or constructing an elaborate fire pit in your backyard, modifications to either the structure of your dwelling or the way you use your property can increase their value but also result in more potential risks for you and, therefore, a higher monthly premium and/or the need for additional coverage. In the examples mentioned, expanding or upgrading your home means your policy should be updated to ensure you will have adequate funds to replace it at its higher value, if ever needed. Adding a feature like a sophisticated fire pit, a pool, or even a trampoline comes with increased liability risks so you should confirm you have appropriate coverage and that your personal property and liability limits as well as medical payments to others will suffice to cover any mishaps.
3 - You bought a house replete with a solar energy system and are very proud to be part of the growing green energy and sustainability movement.
- Verify that you have properly informed your insurance agent in order to obtain an accurate home insurance quote since this type of equipment is not automatically covered by every insurance plan. Making sure your general liability insurance will take care of costs associated with your installation being damaged (e.g. due to wind or snow) or causing injuries (e.g. when the conventional grid is down due to a blackout or if a solar panel flies off the roof and hits a neighbor) will give you peace of mind so you can focus on the benefits of saving on energy costs.
- Even more importantly, make sure you are properly covered if you have decided to add a solar system after buying a house. Massachusetts offers a number of relevant incentives to homeowners such as waiving the 6.25% sales tax for installation, a 15% state tax credit, and an exemption to the property tax increases that would normally be associated with this sort of upgrade that increases property value. However, it is wise to confirm that your installation meets your insurance company’s underwriting guidelines, whether they consider it an attachment to your dwelling and, of course, whether it will cause your premium to go up. It would also be prudent to confirm with your installer that the installation process itself is properly insured and covered.
4 - If you or your spouse work from home in any capacity, confirm that your homeowners insurance includes appropriate coverages.
If you have not done so already, when you request a homeowners insurance quote make sure to explain the specifics of your situation since different scenarios may require unique endorsements. For example, is your wife working from home full-time but also employs a personal assistant? Are you thinking of opening an in-home daycare? Some homeowners insurance policies provide protection for business equipment, to an extent, but you should ask your insurance agent regarding any specialized equipment and how you can purchase coverage for it. Moreover, if clients or business associates regularly come to your house, your liability risk automatically increases which means you should consider commercial insurance for your venture, just like any other entrepreneur.
5 - Your home feels like luxuriously spacious at the moment and you are deservedly known as a seasoned host.
Have you been toying with the idea of renting your space out via Airbnb to bring in some extra cash for that mortgage payment? A typical homeowners, or renter's policy, comes with a “business activity exclusion” clause, which means any claims associated with conducting business will likely not be accepted. Costs stemming from issues like theft, property damage, or injuries will therefore come out of your pocket wiping out your profits or even putting you in debt. The short-term nature of renting via Airbnb also means your average landlord insurance will not cut it either and the insurance Airbnb offers comes with somewhat vague terms. That may mean that you need business insurance as well as a robust umbrella insurance policy, also known as excess liability insurance in order to avoid being personally liable if, for instance, something valuable gets stolen from a guest or if your guest injures someone at your house.
Knowledge, foresight, and keeping your insurance agent in the loop are your best defense against mistakes and misfortunes that can have long-lasting financial or legal repercussions. Let the BRZ team assist you in every step of the way as you navigate home insurance in Massachusetts and stay by your side as you and your property evolve with time.
We can provide the answers that the average online home insurance calculator will not!