Your home is one of the biggest investments you will make during your lifetime. It is more than a house and yard, it is the place where you make memories and love those who are closest to you. Whether it is time spent in family gatherings, or simply evenings spent on homework or laundry, your home is the base of life for you and your family. Because of that, it is extremely important you insure and protect this investment. You do that with home insurance.
The details of Home Insurance
Interestingly enough, most homeowners aren’t aware of the details and don’t understand what their policy covers.
Having the correct coverage for your home can make all the difference in the event you need to make a major claim. It could mean you have a home insurance policy pay to completely rebuild your home and replace your belongings or, instead, you find yourself having to pay a significant amount out-of-pocket. Details are important.
The standard home policy covers events such as wind, hail, water, and theft. Your policy will also cover the cost of a place to live if you are unable to stay in your home due to a loss. This benefit is typically provided up to 12 months. In addition, your policy will also cover, up to your specific limits of liability, legal liability if you or a pet were to hurt someone on your property.
Home Insurance Terms to Know
Some of the terms you will see on your policy are:
- Deductible,
- Replacement cost,
- Medical payment, and
- Liability limit.
These are all very important terms to know and understand.
A deductible is the amount of money you will pay first toward each claim. It can be a fixed amount, say $1,000, or it can be a percentage of the home’s insured value. Therefore, it would work this way. If you have a claim in the amount of $6,500 for a tree falling on your home and you have a fixed deductible of $1,000, you would pay the first $1,000 and receive compensation for $5,500. For a percentage deductible, whatever the calculated percentage is would be what you pay first.
Did you know that if your house is insured for $200,000 and you have a total loss with a policy that is written on a replacement cost basis and it takes $275,000 to rebuild your home that you would have to pay the additional $75,000 on top of the deductible? Some companies offer policies written on a “guaranteed replacement cost” or “extended replacement cost” basis, which helps avoid the issue of unexpected out-of-pocket costs not covered by your policy.
Medical payments to others is in regard to injuries sustained on your property regardless of who is at fault. There are limits to this coverage.
Liability insurance limits are much higher, but only cover incidents in which you are legally responsible.
What is Not Usually Covered in Home Insurance
Another point that is important to remember is that there are certain things not covered by your home insurance policy, unless you add the coverages by endorsement. Things such as:
- Flood
- Sewer and drain back up
Other things are covered but only at a small amount, such as:
- Boats,
- Jewelry,
- Guns, and
- Other kinds of specific valuable items.
Valuable possessions such as these items should be reviewed with your agent. Additional home insurance coverage is available to ensure they are insured properly and at the correct value.
No one wants to have a claim and discover that the coverages in their home insurance policy are less than they thought. To prevent this from happening it is a good idea to engage in an annual review of your policy with your insurance agent to make sure coverage is up to date.
Insurance is one topic that always generates lots of questions. I can give you answers to the questions you have or provide additional information that benefits you. Please feel free to contact me.
Larry