Home and Mortgage Insurance
For home insurance, you want a “replacement-cost” policy that will cover the costs of rebuilding your house if it burns to the ground. Don't buy “resale price” coverage — it includes the value of your land, which will not be damaged in a fire. Make sure the face value of the policy increases every year to cover inflationary costs, and consider “extended” or “guaranteed” coverage to cover 25 percent more than the policy's face value.
Cash-value insurance may cost less, but it can leave you underinsured. Ask your agent what you can do to bring the costs for “replacement-cost” policies down — installing smoke detectors, for example. In lieu of home insurance, renter's insurance will cover the costs of replacing your possessions in case of fire, damage, or theft.
Alert
Insurance companies are increasingly using credit scores to judge customer reliability and responsibility. They will compare your credit payment habits with their best customers and make judgments that can raise or lower rates. If your credit rating is low, it's wise to clean it up before shopping for insurance. If it's stellar, bargain for lower prices.
