Have you taken the time to understand your home insurance policy? Do you know what it covers?
Many people can agree that reading insurance policies can be quite tricky. There is a lot of fine print that can be baffling rather than illuminating. Getting someone to walk you through the documents is a good idea. Public adjusters, lawyers, or brokers can simplify the insurance language. But many of us end up signing the contracts without fully understanding it and hoping for the best.
Well, now you have decided to take home insurance. But true to the insurance policy document spirit, you are unclear about the coverage. You will get all the answers and more as we help you understand the policy document.
Uncovering the Basics of Home Insurance
Your home is an investment that you must protect at all costs. Unfortunately, some situations are not in our control. Take the example of natural disasters like hurricanes or storms. Such can cause extensive property damage, which could take years to recover.
And that is why taking home insurance makes sense. From property damage insurance, you can get back to normalcy after catastrophic events.
Home insurance is the cover you take to get financial protection from damages to the house. The coverage can also extend to home loss, property theft, and personal liability.
As we said in the introduction, it is crucial to understand what home insurance is. You must also delve further into the type of property damage claims you can apply for afterward.
As an individual homeowner, no law requires you to take homeowner insurance. But if paying for the house through a mortgage, the financiers may insist on home insurance. That should cover the full or fair/purchase price of the home.
We will keep reiterating the importance of getting professionals to interpret the documents. Public adjusters, for example, will be a big help when filing claims. They can even reopen old claims if you feel the compensation was insufficient.
Home Insurance Coverage Scope
So what exactly does the home insurance cover? You may, for instance, wonder, should I file an insurance claim for water damage? Is there anything like water damage in kitchen cabinets insurance?
We must explore the scope of home insurance coverage to answer the questions. Also, let us see if it includes property damage insurance.
Insurance Cover for the Home Structure
Regular home insurance will cover the following.
- The repair or rebuilding of the home due to damages arising from natural disasters or fire. Please note there may be some exclusions, especially for natural disasters. Some covers do not include property damage from earthquakes or floods. In such cases, you must take a separate policy or put a rider on the cover.
- Detached structures like gazebos and garages may or may not fall under the cover. Please speak to the insurance agent to clarify this part.
There are three provisions you need to be aware of.
- The replacement cost has a limit to the maximum dollar amount. The property damage insurance covers the cost of replacement. It does not factor in depreciation or appreciation.
- Extended replacement costs cover a percentage of over-the-limit expenses. Most underwriters will offer a 20% limit. You get a buffer in case of unforeseen circumstances like a rise in construction costs.
- Actual cash value covers the cost of replacement. But it will deduct the depreciation due to wear and tear.
It is a good idea to get expert advice on the extra add-ons. You may find that the amount you need to add to the premium payment is not high. Yet, you get the extra coverage. It can be a lifesaver when facing property loss.
Personal Belongings
Personal belongings fall under home insurance. This includes clothing, furniture, sporting equipment, and more. The cover also extends to loss due to theft or destruction by natural disasters. The same applies to anything you may have off-premise. You will typically get 50 to 70% of the house structure cost.
Like the home structure case above, you can get the replacement cost or actual cash value.
So what about jewelry or other high-value items like collectibles or art? You will get compensation. But the underwriters typically put a limit to the amount you can get. At this point, it should be clear why you must spend a lot of time understanding the policy document.
Extra Living Expenses
It may be impossible to continue living in the home due to the property damages. The home insurance cover will take care of extra expenses. Such include restaurant meals, hotel bills, or anything above your everyday living expenses.
But please wait a minute before you check into the Ritz hotel. Many underwriters will, with good reason, put a limit on the amount.
Personal Liability
So what happens if other people sustain injuries on your property and file a lawsuit? The home insurance will cover various scenarios, including:-
- Medical expenses if, for example, the dog bites the neighbor
- Reimbursements if, say, the kids damage the neighbor’s property
- Claims against injuries occurring on your property.
Understanding Deductibles in Home Insurance
Please take note of the section on deductibles in the home insurance policy. The underwriters do not take the total amount when making a claim settlement. There is an out-of-pocket expense you must undertake before the cover kicks in.
The amount is usually not very high and could range from $500 to $1000. An insurance company may also prefer to have it as a percentage of the total coverage amount.
Deductibles affect premiums in one way. The higher the amount you pay as deductibles, the lower the premiums. This is because you’ll be responsible for a larger share of the risk.
Final Thoughts
Your home is an investment that you worked hard for. You would do anything to protect it. But sometimes, there will be situations that are outside of your control. That could result in damage to the interior or exterior of the house.
There could be a total loss in other instances, like when a fire razes the house down. In other cases, people may break into the house and steal your property. Home insurance and property damage insurance will compensate you for such losses.
Make sure you get expert advice from public adjusters or legal experts.