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Homeowners. Tips to get the best home insurance

The rules for dealing with your homeowners insurance coverage have totally changed over the past few years. Most people now have too little homeowners insurance, the wrong types of coverage, and unknowingly do things that can get them dropped by their insurance company. Here’s how to find—and keep—the right homeowners insurance:

  • Don’t file small claims. You may lose a valuable claims-free discount, which could boost your price by as much as 35 percent, even if the claim was for just a few hundred dollars. Even worse, many insurance companies now drop customers after filing just one or two small claims. After one insurer drops you, it can be tough to find affordable coverage anywhere. Raise your deductible to at least $1,000, which can lower your premiums by up to 30 percent and eliminate the temptation to file small claims that could cost you your coverage.
  • Check your CLUE report, the database where insurance companies share information about you. Errors in your CLUE report can make it difficult to find affordable coverage anywhere and may hurt you if you’re trying to sell your home. Also check a home’s CLUE report before you buy, so you’ll have a heads up about any problems that could cause insurers to shun the house.
  • Compare prices from several companies, but don’t switch insurers just to save a few dollars. You may lose a valuable claims-free discount, and a new insurer is more likely to drop you after filing a few small claims.
  • Check out the insurer’s complaint record with the state insurance department and national database. Homeowners insurance claims are some of the most complex to settle, and the experience can be very different from company to company— which you’ll quickly discover in any Florida, Louisiana, or Mississippi neighborhood hit by hurricanes. It can be worthwhile to pay a few extra dollars in premiums if your insurer is less likely to hassle you at claim time.
  • Most people have too little homeowners insurance because they haven’t increased their insurance amount to keep up with home improvements or rising building costs. Have your agent or company reassess your home’s replacement value every few years, hire an insurance appraiser, or use a Web tool that can help you estimate the value. It can cost just $50 to $100 to increase your coverage by $50,000.
  • Homeowners insurance policies do not cover flooding, but you can get coverage through the National Flood Insurance Program (www.floodsmart.gov). The coverage can be valuable even if you don’t live in a high-risk flood area—even before Hurricane Katrina, 25 percent of all flood-loss claims were filed in low-to-moderate risk areas. You can generally get $100,000 of coverage for $230 to $860, unless you’re in a particularly high-risk area. Also consider adding earthquake coverage, sewage backup coverage (read more in Home Insurance Expert section), and building and ordinance coverage (for people with older homes), which aren’t automatically covered in most homeowners insurance policies. Buy extra coverage for jewelry and other valuables worth more than $1,000 (read more in Home Insurance Expert section.
  • It’s important—and inexpensive—to buy extra coverage if you have a home office or rent an apartment. Also consider an umbrella policy to protect your family from expensive lawsuits; you can generally add $1 million in liability coverage for just $250 to $350 per year.
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