People often take a laissez-faire approach to insurance. The bill arrives and you pay it with little or no thought to reviewing the coverage and premiums. This may not be good stewardship. Below are a few things to be considered when you get your next home insurance bill.
A typical home insurance policy covers three areas: Structures, Contents and Liability. These are three areas where it unfortunately takes a significant loss before most people get in touch with these issues:
1. Some things are excluded from coverage. Home insurance provides protection in the event of loss or damage due to an emergency or disaster. Make sure you know what’s excluded before there is a loss.
2. There are limits to the amount of coverage. Too often, insurance consumers are looking at the benefits without seeing the reality of the limits.
3. There is a major difference between “Actual Cash Value” vs. “Replacement Costs” Typically there is a clause in the policy that describes your coverage. For example, it may state that as long as the dwelling is insured for at least 80 percent of the actual value, loses will be covered for “replacement costs”—up to policy limits.
Home owner policies typically come in one of seven standardized forms. For most people who own their own, an HO-3 policy is used. Renters usually use an HO-4 policy that covers personal property and liability, but not the structure. All forms of homeowners insurance include basic general liability protection that gives you protection for things that go beyond your house and its contents.
Are damages from things like earthquakes, floods, power failure, war, nuclear hazard, earth movement, pets, etc. covered? If not, should they be? If so, many of these coverages can be added through a “rider.” High values items often need a “rider” as well.
When you experience a loss and have a possible insurance claim, KNOWLEDGE is your best defense. Knowing exactly what your homeowners policy covers and excludes is critical, and it helps you determine whether you need to purchase additional special coverage for your circumstances.
Know you coverage! Know your limits! Know your exclusions!