When was the last time you checked your home insurance coverage or compared your rate? Let’s be honest, in today’s world we have so many things to do and so little time to do it, that we don’t find the time or effort to go over tedious things such as homeowners insurance. Home insurance is not the most exciting thing to talk about, but knowing your coverage and the way it works can save you a headache incase of a loss and will protect your biggest asset. If you have your home insurance payment combined with your mortgage payment you might not have checked your premium or coverage in a while, so its time to dust off those home insurance declaration pages, it might end up saving you some money.
So what are the different parts of a homeowner’s policy and what do they cover?
Dwelling coverage: This is the amount that the insurance company will pay up to in case of a loss. This is where the bulk of the premium is charged, the higher your dwelling coverage usually translates to a higher insurance rate.
Other structures: This is coverage for structures that are not part of your house, but are on your property, like a tool shed.
Personal Property: This covers your personal belongings/possessions in case of damage or theft as long as the damage is a result from a covered loss.
Loss of use: Protects you in the event that your home is destroyed or damaged and you must seek other living arrangements while repairs are made.
Personal Liability: This coverage would protect you against lawsuits brought against your and your property.
Medical: This is the amount the insurance company would pay incase a person is injured on your property and did not wish to pursue a lawsuit against you.
Let’s go over some of this coverage in more detail:
It is always important to check your dwelling coverage; you want to make sure you have enough coverage to cover your house in case of a total loss. It is also a good idea to have extended replacement cost coverage on your home. This will extend your dwelling coverage an additional 25%-50% in case of a total loss.
For personal property, you should know the difference between Actual Cash Value (ACV) and Replacement cost. ACV will pay you the depreciated value of your personal contents, so if you bought a TV for $1,000 and the value at the time of loss is $200 the company will only pay $200. Replacement Cost would pay $1,000. Insurance companies have limits on contents such as Jewelry, Firearms, and art. If you have possessions that go beyond these limits make sure you schedule those on your policy with your insurance agent.
In today’s lawsuit happy society you should always make sure you have adequate Personal Liability. Most homeowner’s policies come standard with $100,000. I would recommend raising the limit to at least $300,000, because the price is minimal for the amount of protection you will obtain.
This general overview of Homeowners insurance should provide you with a good understanding of how your policy works. Remember to review your coverage, make sure your coverage is enough to protect your biggest asset. Do not be afraid to compare prices, by doing this you will make sure you are obtaining the most coverage possible for your money. It is always good to discuss your coverage with an insurance agent… feel free to contact me with any questions you may have.