Shop for Homeowner's Insurance

Homeowner's insurance protects you and your mortgage lender from things that can go wrong, including:

• Casualty
  Insurance covers most types of damage to the structure of your house like fire, wind, or hail. In areas prone to wildfires, floods or earthquakes, you'll probably need an additional policy to protect you from damage from specific natural disasters.

• Liability
  Insurance provides protection in case a visitor is injured in your home.

• Theft or damage to personal property
  Insurance covers personal possessions like your furniture, clothes, and appliances.

Disaster Insurance

Most home insurance policies do not cover flooding or damage due to earthquake. Flood insurance can be purchased through your insurance agent, and is also available through the National Flood Insurance Program for areas at high-risk for flooding.

Earthquake coverage is also a separate policy or sometimes an endorsement to your existing policy, usually available through your insurance agent. In California, earthquake insurance can also be purchased through the California Earthquake Authority.

Be sure to understand exactly what disasters your insurance covers and what it does not. For a guide to disaster coverage, visit The Insurance Information Institute.

Types of Homeowner's Insurance

There are four main types of insurance related to repairing structural damage:

• Actual cash value
  This insurance covers an amount equal to the replacement value of the damaged property, minus a depreciation allowance.

• Replacement cost
  This insurance covers the cost of replacing damaged property without a depreciation deduction, but with a maximum dollar amount.

• Extended replacement cost
  This insurance covers the cost of replacing your home up to a stated percent (usually 20-30%) over the amount insured.

• Guaranteed replacement cost
  This insurance covers the cost of replacing damaged property without a depreciation deduction or a maximum dollar amount.

The terms can be a little confusing. Be sure to ask an insurance professional to give you real-life examples so you can understand the differences.

Saving Money on Insurance

You can save money on your homeowner's insurance by doing your research. Shop around and compare different services and prices. Your family and friends can be good resources. You can also check with the federal government's Citizen Information Center, or AM Best. You can also save money by:

• Increasing your deductible
  The higher the deductible, the less expensive the insurance premium. But don't forget that, in the event of a loss, you'll have to pay the amount of your deductible from your own money before your insurance pays for any damages. Don't take a deductible that will be too much for you to pay in the event of a loss.

• Consolidating your insurance
  If you buy homeowner's and auto insurance with the same company, you may be able to get a discount.

• Looking at the age and construction of your home
  Insurance costs tend to be lower in newer homes with new equipment. Construction designed to be particularly resistant to wind and earthquake damage may also lower your rates.

• Only insuring the value of the structure and its contents
  While your home and its contents are at risk from fire, theft, etc., the land your home sits on is not.

• Being safe!
  Install smoke detectors, security systems, deadbolts and other safety devices. Safety features can lower insurance rates.

• Quitting smoking
  Some companies offer reduced rates for nonsmokers.

• Flaunting your age
  If you're over 55, let the insurance company know. You can probably get discounts.

• Getting group coverage
  Your college, credit union, or business associations may qualify you for special rebates.

• Staying with your insurance company
  Some companies reward loyal clients with reduced premiums.

Title Insurance

Because a bank is loaning you money to purchase your home, the lender will appear as the first lien on your property. To protect your lender from being accountable for liens on the title, you will be required to obtain a lender's title insurance policy. For an additional fee, the title insurance company can issue homeowner's title insurance that gives you protection in the event someone is trying to collect on a lien from a prior homeowner. Your policy will protect you as long as you own the home, even if you refinance or pay off your loan, and depending on the policy, it can protect you even after you sell the house. You should ask your lender for information about homeowner's title insurance.