Understanding your home insurance and what it covers is important but easier said than done. Insurance contracts are written in a legal language that most of us do not know. To understand your coverage, you may want to seek the help of a local insurance agent. You need to know what is covered – hopefully long before you need to file a claim.
You probably have home insurance if you own a home, as this is a requirement when you take out a mortgage. You may have put it in place but are unsure of what is covered and what is not. For example, if you live in an area with a high risk of flooding, you must buy a separate flood insurance ̵1; your homeowner’s insurance probably does not cover that danger. Earthquake damage also requires extra coverage.
Home insurance basics
Home insurance covers damage (or destruction) to the interior and exterior of your home, loss from theft and covers you for personal liability if a person is injured on your property, up to the insurance limits. These policies come in three basic types:
- Cash value of your home
- Cost of replacing your home
- Extended change of home
Homeowners’ policies vary but generally cover damage to a home from fire, storms, lightning, damage to property and loss of property due to theft. You can have home insurance with limits that are much lower than you actually need. The modern home is equipped with many expensive items, from electronics to appliances, to jewelry, clothing and other items. Replacing your home and belongings is costly – make sure you have the level of coverage you need in case the worst happens. Although we can not control the weather, we protect our homes and property and avoid the extreme financial losses associated with a natural disaster.
The insurance companies limit what they pay in compensation for lost or stolen property to 50 to 70 percent of the insurance you have taken out on the structure itself.
You may not consider the importance of liability protection. However, if another person is injured on your property, they can file a lawsuit to try to claim damages. Your home insurance protects you if an unfortunate incident occurs on your property. The amount of liability protection can be crucial to your financial future. If the insurance limits are too low to cover an injured person’s losses, you can be the subject of a lawsuit to gain access to your other assets. Many people choose to increase their liability insurance beyond the minimum required.
When you need a new place to stay
When a home has been severely damaged, it can be uninhabitable. When this happens, you may find that your home insurance may be the best purchase you have ever made. Your insurance can reimburse you for the cost of a hotel, renting another home and other expenses while your house is being repaired. Each home insurance policy has specific daily limits for families in this situation, and you should be aware of what they are.
If you need help with your home insurance, talk to one of our friendly local agents. We can help you understand your policy and make sure you have the coverage you need to protect your greatest asset – your home.