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Too much insurance doesn't pay off
- Home replacement protection. Don't listen to the mortgage lender who insists that you insure your home for at least the amount of the loan balance. A home's replacement cost does not hinge on the amount of the mortgage, especially if you live in an area where home prices are appreciating rapidly. Insuring your home for more than its replacement cost may a violation of laws in your state.
- Look into a guaranteed replacement cost policy. Have at least two insurance agents estimate the replacement cost of your home; replacement cost is usually determined by square footage and quality of construction. These policies usually cost more than a standard policy.
- Check the amount of your deductible. By raising your deductible from $250 or $500 to $1,000 or $2,000 per insured loss, most insurers will reduce premiums by 10 percent to 20 percent. Make sure that you put aside that much money to cover the higher deductible.
- Changing coverage. Discuss with your insurance agent the advantage of insuring personal property for depreciated cost rather than replacement cost: You may save up to 20 percent in premiums by insuring for depreciated value.
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