Homeowners Insurance for Seniors

Are you a senior homeowner? Find out how you can benefit from home insurance and where to find the best deals from top companies

senior couple with homeowners insurance agent

If you own a home, insurance is one of the most important investments you can make. Home insurance is something that people of all ages need to be aware of. However, as you age, recovering from a housing disaster can be even more financially and emotionally draining. That's why it's important that seniors have homeowners insurance.

This article outlines what senior homeowners need to know about home insurance, including costs, coverage, and policies.

How is the Cost of Homeowner's Insurance Determined?

Your rate depends primarily on these factors:

  • Location: Do you live in an area with natural disasters like floods and hurricanes? You will pay a lot more. Insurance companies know which regions file the most claims due to natural damages, so they charge more in those areas.
  • Crime: Like natural disasters, if your area has high crime rates – especially burglary and vandalism, you will pay more for home insurance.
  • Claim frequency: Insurance companies don't like when you file claims. It costs them money. If you have filed claims in the past, insurers believe you're more likely to do it again. If you file enough claims, they can outright cancel your coverage.
  • Your home: What kind of materials is your home made of? When was it built? Is it well-maintained? These all play a role in your insurance rates. For example, brick houses are less at risk for a devastating house fire, so they cost less to insure. And newer, well-maintained homes are usually cheaper as well.
  • Safety features: Do you have a security system and deadbolt locks? Do you have smoke detectors and sprinkler systems? Is your home located near a fire station? If you said yes to any of those questions, you will likely save some money on homeowner's insurance.
  • Risk: Conversely, homes cost more to insure if they have risky add-ons like swimming pools and trampolines.
  • Credit score: Unfortunately, folks with bad credit scores pay a lot more for home insurance. Apparently, studies show that people with bad credit are riskier to insure and more likely to file claims. Credit-based insurance scoring is a controversial practice, but it's reality.
  • Coverage levels: Like all forms of insurance, your coverage levels are directly proportionate to the price of your premium.

What Seniors Need to Know About Home Insurance

There's a lot to consider. How much coverage do you need? What companies offer policies for seniors? How can you save money on your policy? How do you know you're getting a good deal?

First, your home insurance is not set in stone. It can and will change. Here are some of the things that will change the price of your policy:

  • Getting a dog
  • Remodeling a part of your home
  • Redoing your roof
  • Raising (or lowering) your credit score

Home insurance is extremely complex. Finding someone to help answer your questions is a good step.

"Your agent can be a terrific resource," says William Hebert, director of regional sales for Mercury Insurance. "He or she is an expert and can help you determine what coverage you need."

Since insurance is complicated and your rates often change, it's important to stay educated about your home insurance. When it's time to renew, shop around and compare quotes from other insurance companies. Reassess your coverage levels. If you haven't already, consider bundling your home insurance with your car insurance.

We will cover the ins and outs of home insurance plans, where to get them, and how to save money.

 How Much Coverage do Seniors Need?

You can tailor your home insurance policy to fit you and your home. Coverage options are diverse and dependent on your needs. But it's important that you have enough.

"Be careful not to shortchange yourself on coverage," warns Hebert. "Homes are most people’s biggest asset. Balance cost savings with necessary protection."

It's tempting to get cheap home insurance to save money. But that's not advisable.

"Don’t focus solely on the price, balance your decision on the value and coverage provided for the price you can afford," explains Hebert.

What Does a Home Insurance Plan Cover?

If you don't tailor your home insurance to your needs, you're at risk for unique problems.

For example, homeowners in disaster-prone areas should purchase flood coverage or earthquake insurance. People with jewelry collections or rare possessions can add a personal property policy. And you can purchase specific amounts for each coverage type. Here are some common coverage options:

  • Dwelling: Known as Coverage A in many policies, this covers damages to the physical structure of your home. Note that dwelling coverage only pays for covered risks like fire, hail, theft, vandalism, and more. Depending on your provider and plan specifics, things like floods might not be covered.
    • Recommended coverage: Buy enough insurance to cover the cost of rebuilding your home. As a senior, your home is your sanctuary, so make sure it's protected. Note: don't include the value of the land – just the structure. Due to the varieties in homes, construction costs, materials, and more, you should consult an expert to find out how much your home is worth.
  • Unattached/other structures: Do you have a separate garage, tool shed, or mother-in-law unit? Any structure that isn't physically connected to your main dwelling may need additional coverage. Many unattached structures policies are based on a percentage of dwelling coverage. For example, if you have $450,000 in dwelling coverage, that could translate to $45,000 in unattached structures coverage.
    • Recommended coverage: Find out if your unattached coverage is based on dwelling coverage or a flat rate. If so, make sure it's enough to cover the value of said structures. Some folks will skimp on unattached structures because they aren't as important as their actual home.
  • Liability: This coverage comes standard with most homeowner's policies, and it's important. Liability coverage protects you from lawsuits if someone is injured on your property. Most liability coverages also pay for other people's medical bills, in the event of an injury. You can purchase separate medical coverage for liability policies that don’t include medical coverage.
    • Recommended coverage: A standard liability policy usually covers $100,000. If you have a high net-worth, consider purchasing extra coverage. Your assets are at risk in the event of a lawsuit.
  • Loss of use: Lets imagine that your home is destroyed by a fire. While your dwelling coverage will cover the cost of the damages, it won't pay for your temporary housing. Loss of use coverage does just that. Most loss of use policies will help with hotel costs, food, travel, and other living expenses.
    • Recommended coverage: Loss of use plans are usually set at 20 percent of your dwelling coverage. For many people, that's enough. But seniors may want to consider more, as their living situations can be more delicate.
  • Personal property: Dwelling and other structures cover the building – but what about the things inside? Personal property coverage will. This coverage protects your furniture, clothing, appliances, and everything you own from theft and damage. You can purchase extra coverage for high value items, like collectibles and antiques. For personal property coverage, it's important to know the different between replacement cost and actual cash value. We cover that below.
    • Recommended coverage: Your ideal coverage levels are based entirely on the value of your possessions and your needs. Consult an insurance agent to find the right coverage amount. If your assets are greater than the maximum coverage amount, you can purchase an umbrella policy.

Actual Cash Value vs Replacement Cost Coverage

When you file a claim, your insurance company must determine a monetary value for your loss. There are two main methods that insurance companies use to decide how much to pay you for a claim.

Replacement cost is the exact amount it'd cost to replace damaged or stolen property. Your item is valued by what it costs to purchase a replacement. Replacement cost doesn't take depreciation into account.

Let's pretend your couch was destroyed by a fire. You paid $1,000 for this couch last year. With replacement cost coverage, your insurance company will reimburse you the full $1,000. If that same couch now costs $1,200, they'll pay you the extra $200.

Actual cash value, on the other hand, is the cost of the item plus depreciation. Think of it as market value. Your insurance company might value your couch at $800 after a year of depreciation. That's how much you would receive in an actual cash value claim.

You can purchase either type of coverage for your property. Note that replacement cost coverage is more expensive since it doesn't account for depreciation. But for many people, it's more than worth it when it's time to file a claim.

"Make sure that the replacement cost coverage on your home is reasonable and adequate," says Hebert. You won't regret it when it's time to file a claim.

You can read more about actual cash value and replacement cost coverage here.

Senior Discounts for Home Insurance

You can benefit from plenty of discounts during your golden years, including home insurance. Here are some common discounts specifically available to seniors:

  • Retiree credits: This is the big one. Since retired seniors are home often, they're more likely to be around in the event of an emergency like a fire or a burst pipe. This will save insurers money in the long run. That's why you can earn a retiree discount of 10 to 20 percent.
  • Club or group membership: Seniors affiliated with certain groups – AARP being one of them – earn insurance discounts. An AARP membership can get you a 10 percent discount from many insurers.
  • Loyalty bonus: People who stay with their insurance company for at least three years can earn loyalty discounts. These rate breaks range from five to 10 percent.
  • More: There are numerous available discounts on home insurance for all age groups. Here are 19 ways to save money on home insurance.

What Companies Offer the Best Home Insurance Policies?

Several insurers sell policies for homeowner's. According to J.D. Power, here are the 10 best homeowner's insurance companies based on overall satisfaction:

  1. Amica Mutual
  2. Auto Club of Southern California Insurance Group
  3. Cincinnati Insurance
  4. GEICO
  5. Auto-Owners Insurance
  6. Erie Insurance
  7. State Farm
  8. American Family
  9. Progressive
  10. Chubb

Use QuoteWizard to compare quotes and find the best policy.

Make Sure You Have Identity Theft and Fraud Protection

It's an unfortunate reality that there are many scams that specifically target seniors. From fraudulent IRS calls to internet scams, there's a lot to be aware of. No matter how informed you are, it's still possible fall victim to scams.

According to the FTC, 36 percent of people ages 50 and older are victims of identity theft, and 49 percent of individuals 50 and older are victims of fraud. It's a serious problem.

Fortunately, many homeowner's insurance companies also offer identity theft and fraud protection. It's usually an optional endorsement, meaning it costs extra. According to the Insurance Information Institute, adding identity theft protection to your home insurance policy usually costs $25 to $50 per year.

To avoid identity theft, be extremely cautious about giving out your personal information. Many scammers will contact you pretending to be affiliated with an important organization to access your details.

"The Social Security Administration, the IRS, or your local police department are incredibly unlikely to ever ask you for this information over the phone, email, or via social media," says Amy Nofziger, AARP's fraud expert.

"Don’t display or give out personal details like your birthday, bank account number or Social Security number to almost anyone who asks over the phone," warns Nofziger. "If you have any doubt at all, hang up, or close your browser and verify who contacted you."

It's not just phone scammers and internet hackers that can compromise you. "One method we continue to see that targets older adults is the simplicity of a stolen wallet or purse," explains Nofziger. "Don’t carry your Social Security card around with you. If you need it, take a picture of it with your phone or carry a copy."

If you're a victim of identity theft or fraud, your home insurance company can help you out. Since identity theft and fraud protection is so affordable, it's a smart purchase.

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