Whether you are new to your home or want to make sure your existing policy has covered you, here is the information you need
A home insurance policy is one of the financial documents that can have frightening finesse. Once you have logged out, it is tempting to put it somewhere deep in the filing cabinet and rejoice that you can check it from your to-do list.
But your home insurance is not something you want to cancel and forget about. If you experience theft or a natural disaster, the last thing you want to do is dust off the policy and find out that you do not have sufficient coverage. We spoke to a home insurance expert who told us what you should know about your insurance and make sure you are protected.
In this article:
A basic home insurance policy does not usually cover floods and earthquakes  The terms of home insurance policy may vary from company to company. In general, a basic home insurance company pays to repair or replace your home and belongings if there is damage caused by such risks as fire, wind, tornadoes, hail or lightning.
Floods and earthquakes are not usually included as a covered hazard; instead, you must purchase a separate policy for these events. Michael Gulla, head of underwriting at Hippo, a real estate insurance company based in California, says assessing risk based on where you live.
If you live in Los Angeles, earthquake insurance may be a good idea. If you live on a mountaintop, flood insurance may not be a priority. However, if you live in high-risk coastal areas of Florida, Texas or Louisiana, flood insurance is not just a necessity – lenders may actually require you to have it.
The Federal Emergency Management Agency (FEMA) also warns. Floods can happen anywhere, even if you live in a low-risk area, so you may want to talk to your insurance agent about what additional coverage is available. According to FEMA, just one inch of water can cause $ 23,635 in damage to a 2,500-square-foot one-story house and $ 3,172 in personal property damage.
Although the government may come in with help, this support may not be enough to cover the damage. FEMA reports that grants offered for disaster relief average $ 5,000 per household. Another relief option is disaster relief loans, but you have to repay these loans with interest.
Your coverage should be sufficient for a complete remodel, but is often not
As with, yes, life insurance, part of having home insurance is considering the worst case scenario. In this case, it would mean that you lost your home completely during a natural disaster. If this happens, your housing coverage is the part of the policy that would pay to rebuild the house as long as the damage occurs due to a covered event. Unfortunately, this is where many homeowners are underinsured.
"Most homeowners in the United States end up underinsured for some time on the value of their home," according to Gulla. This is because the cost of building materials can increase every year, and most insurance companies do not increase your reconstruction cost to meet that demand. Instead, they can add inflation of 1% or 2%, but natural disasters in recent years have driven construction costs far up, says Gulla.
Also keep in mind that you may have upgraded the surfaces in your home, which may mean that your coverage is no longer sufficient to protect your investment. A good rule of thumb is to calculate the cost of rebuilding and talk to your agent when making major changes to ensure you have adequate coverage.
Of course you are probably wondering: How can I calculate the cost of rebuilding?
An insurance company can help you determine the cost of rebuilding your home, or you can hire an independent appraiser. Remember that the cost of rebuilding your home may not be the same as the market price of your home, so being insured for the estimated market value you are looking at, says Zillow or Trulia may not give you the right amount
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