Five Things to Know about Home Insurance Coverage

Nov 09, 2015

MoneyLife100 What would happen if your home was damaged or broken into? Average insurance claims range from about $3,600 for theft to over $37,000 for fire or lightning damage, according to ISO, an insurance industry analytics company. When you’re making decisions about your home insurance coverage, the Pennsylvania Institute of Certified Public Accountants recommends keeping this advice in mind.

It’s Smart to Shop Around

Even if your mortgage lender recommends an insurer, you may want to consider checking out three to five other companies’ premiums to be sure you get the best deal. Read the policies carefully to confirm that they are comparable, and be sure the seemingly less expensive options provide all the coverage you need. Compare their prices and, if available, consumer reviews. There may be considerable price differences, for example, between policies that offer replacement value (which covers the expense of rebuilding a similar home or replacing your possessions at current prices) and actual cost value (which reimburses you what it will take to replace your home after subtracting depreciation).

Be Sure to Ask for Discounts

When evaluating insurance companies, find out if your top choices offer discounts for steps you take to make your home more secure. These steps might include installing alarm systems; dead bolt locks; updated heating, wiring and electrical systems; smoke detectors and sprinklers; or having well-maintained stairs, driveways, and sidewalks. You might even get a discount for a roof made with a sturdier level of material. If you already have a policy and undertake an improvement or update that makes it less likely your home will suffer damage, theft, or a liability claim, be sure to contact your insurer and ask about a discount. Additionally, if you’ve been claim-free for a number of years, or a long-time customer of your insurer, then you may qualify for other discounts.

Create a Home Inventory

If your home suffers significant damage, would you be able to list all the items lost? After building up a wide range of possessions over the years, this may be a difficult task. Only about 50 percent of homeowners have a list, according to the Insurance Information Institute, but an up-to-date home inventory is something that can be extremely valuable in establishing your claim. The list should include your belongings and their value based on receipts or other documentation available, and should be supplemented with photographs. Keep the list in a fire-proof safe or safe deposit box along with other important documents – including your insurance policy information and agent contact details – and consider storing a copy with a trusted friend or relative so it’s easily available when you need it.

Review Your Policy Regularly

Checking the fine print at least once a year ensures that you’ll have full coverage for new purchases or home additions. If you have floaters addressing items not covered in the base policy, such as expensive jewelry, artwork, or technology, use this review to decide whether you need to increase, lower, or cancel the floater based on
changing values.

Factor in Insurance Costs When Buying a Home

Just as some home improvements can lower your insurance costs, there are situations that can raise them. Being in a flood plain or in an earthquake-prone area are examples. They will require additional coverage, so it’s worthwhile to ask about the possible need for other insurance when you’re buying a home. A CLUE (Comprehensive Loss Underwriting Exchange) report details a home’s loss history, including claims made and loss types and amounts. They are only available to homeowners, but consider asking for one before buying a new place.  

Your CPA Can Help

Your local CPA has extensive experience helping people address important financial issues. Be sure to turn to him or her with all your financial questions. To find a CPA by location or area of expertise, as well as other resources, visit

The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premiere statewide association of more than 22,000 members working in public accounting, industry, government, and education. Founded in 1897, the PICPA is the second-oldest state CPA organization in the United States.

Money & Life Tips are a joint effort of the AICPA and the Pennsylvania Institute of Certified Public Accountants (PICPA), as part of the profession’s nationwide 360 Degrees of Financial Literacy program.