Buying Homeowners Insurance? Suze Orman Says This Feature Is Key

You really don't want to go without it.

If you own a home, you need homeowners insurance. Not only is it usually a prerequisite to getting a mortgage loan, but it's something you need to have in case your home sustains damage, whether due to a flood, fire, or weather-related event.

Homeowners insurance can also protect you in case someone gets injured on your property. Let's say you don't clear the ice from your driveway and a delivery person slips and sustains an injury. Your homeowners policy might cover their medical bills so you aren't required to pay out of pocket.

But putting a homeowners insurance policy in place isn't enough. You should also make sure to buy the right homeowners insurance. And if you ask financial guru Suze Orman, there's one key feature you should really be on the lookout for.

Protect yourself in the face of inflation

Consumers have seen firsthand how inflation can make the cost of just about everything more expensive. Over the past year and change, inflation has soared at an unusually rapid clip. But even during periods when inflation is more moderate, in general, expenses naturally tend to rise over time. And that extends to the cost of building and/or replacing your home.

That's why Suze Orman insists that it's important to buy homeowners insurance with extended replacement cost coverage. Doing so could help ensure that you're able to have your home fully rebuilt if it's damaged or destroyed, despite the higher cost of doing so.

It's common for homeowners insurance to offer regular replacement cost coverage. But in that scenario, warns Orman, your payout is limited to 100% of the original value of your home and the items contained inside it, like your furniture and electronics.

What extended replacement cost coverage does is protect you from rising costs related to your home and its contents. With this sort of coverage, you might get a payout up to 125% of the original value of your home and belongings. And that's important because over time, the cost of replacing your home and belongings could rise. But with extended replacement cost coverage, you're covered in that regard.

Read the details carefully

Owning a home is a huge expense. So it's natural that you'd want to save money on homeowners insurance to free up money for other costs, like property taxes, maintenance, and repairs.

But rather than opt for the cheapest homeowners insurance policy possible, it could be worth it to pay a little extra for extended replacement cost coverage. That way, if the cost of replacing your home increases over time, you'll still be protected. Not every policy includes this feature, so pay attention to the fine print when you're shopping for homeowners insurance.

And if you already have homeowners insurance, you may want to ask about upgrading your policy so it includes extended replacement cost coverage. Homeowners insurance is supposed to give you peace of mind. It's worth paying a little extra to really get the protection you need.