The importance of having adequate home insurance can’t be overstated. Your coverage provides financial protection against unexpected events like natural disasters (such as a flood), or theft by good-for-nothing opportunists. Home insurance safeguards your home, possessions, finances, and the people coming by to visit, allowing for much-needed stability in times of crisis.
Underinsuring your home leaves you vulnerable to significant losses from unforeseen events and jeopardizes the lifestyle you’ve worked hard to establish. However, conversely, over-insuring means you are spending money when you do not have to.
As the cost of living continues to rise and many Albertans struggle to make ends meet, it makes sense to revisit your expenses. Experienced insurance brokers such as us at Lane’s can help you find the perfect balance of home insurance coverage for your property. A small investment of your time could end up paying off in added savings you can use for the things you really want to.
Actual cash value vs. replacement cost insurance
Actual cash value (ACV) and replacement cost insurance are different coverages specifically for your belongings. Actual cash value coverage refers to the current market value of items in your home and is calculated by taking an item’s original purchase price, then factoring in any subsequent appreciation or depreciation.
Replacement cost differs from ACV in that it reflects the amount of money you would need to spend to replace a damaged or stolen item. Depreciation does not factor in, but appreciation does.
In almost all situations we highly recommend replacement cost insurance. However, on average, home insurance costs increase by 8% with this type of coverage.
Opting for ACV is definitely a way to prioritize affordability, however, it’s important to note that this choice will result in lower payouts for personal property claims. An insurance broker can help you crunch the numbers and perform an evaluation to decide if the risk is worth it. ACV can be a good choice if your furniture, electronics, and other belongings are quite new.
Perform a home evaluation
A thorough home evaluation can help you determine if you are covering things that do not need to be covered. There are several online templates that can help you get organized. Some essential details include:
- A list of everything in each room in your house such as furniture, appliances, electronics, jewellery and artwork, and their receipts if possible. If no receipts are available, a guesstimate on worth is good enough.
- Custom items such as kitchen cabinets bathroom vanities, curtains, blinds and draperies.
- Make sure to note renovations and the use of more expensive materials.
- Don’t forget things like lamps and lighting, photos, accessories, and knick-knacks.
- The value of tools and seasonal equipment (such as sports equipment and camping gear) can add up.
Your home evaluation can then be presented to your insurance broker, who will then provide advice on the best way to insure your possessions.
How much is your home worth?
Real-estate valuations are always fluid in Alberta and may not be the best representation of your home’s actual worth. Sure, you may be able to sell your bungalow for $650,000, but should it tragically burn down it may not cost nearly that much to rebuild. It all depends on a number of factors.
In essence, insurance companies are mainly interested in how much it would cost to demolish an existing structure, remove all the debris, and rebuild an identical or near-identical home on the site. Local construction and materials costs are pivotal in determining the home insurance coverage for your home.
Your Lane’s insurance broker can help you locate someone with the expertise to provide a comprehensive rebuild assessment for your home. You may also consult multiple local builders to ascertain the average square-foot construction cost. For instance, if the rate is $175 per square foot and your home measures 2,000 square feet, aim for $350,000 in coverage, but make sure to revisit this number often.
Don’t overlook liability
Liability is not the place to scrimp and save on your home insurance coverage. In the event of an accident on your property, sufficient liability coverage is crucial. If you have a dinner party and a guest falls down your front steps, you don’t want to be underinsured. In recent years the average liability claim for bodily injury and property damage has been $15,854.
Check into your deductible
Ask your insurance broker whether you can save money by splitting your deductible. This means paying a higher amount for certain claims and a lower amount for others.
You may also want to check into your riders. Many home insurance policies have additional riders for things such as refrigerated property, for example, the contents of your fridge. Why spend more for $500 worth of refrigerated property coverage when you eat takeout every night?
Trust a broker to help you save
Fundamentally, insurance brokers are your best bet for helping you save on your home insurance while also guaranteeing the most complete coverage available. We understand the needs of our clients, are highly knowledgeable in our field, thoroughly vet the products we provide, and are able to get better deals due to established relationships with the insurance companies we work with and trust.
Purchasing your coverage through a broker rather than directly from a provider buffers you against the risks and pitfalls that arise from not knowing enough about your insurance products. We at Lane’s are a customer oriented, matter-of-fact insurance brokerage that believes customer service is still important to people. We work for you, not the insurance companies. Contact us at our Calgary, Edmonton, Banff and Alberta offices.
