How to Know Exactly What Your Home Insurance Covers

Buying homeowner insurance is something everyone should purchase. Have you ever wondered exactly how much it would cost to replace every single thing you own and how easy it would be to pick your life up again after a major event?

 

While many of us don’t want to think about the worst happening, for some people, it does, and having to pick up the pieces and start over can be a hard and emotionally draining prospect, not to mention expensive if you aren’t adequately covered.

Factors such as your local neighborhood, the vicinity of a local fire station, and the size of your house all play a part in making up your home insurance quote.

However, not all home insurance policies are made the same. Different providers have different stipulations, and the terms and conditions can vary from one carrier to the next.

When it comes to purchasing something as important as home insurance cover – which some landlords may stipulate you need as a renter and all mortgage providers insist upon for homeowners, the last thing you should be doing is skimming over the small print. In fact, the small print should be investigated thoroughly. Usually, contents insurance is covered by homeowners insurance, rental insurance, and condo insurance.

So what should you be looking for when taking out a home insurance policy?

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Cash Value or Replacement Cover

One of the main differences you should be looking for in a home insurance policy is whether your contents are covered for their actual cash value or a replacement product.

Actual cash value means you will get the cost of the item for what you paid for minus any depreciation. Value for a replacement product means choosing an equivalent replacement product that is the closest match as a replacement item.

If you choose to have the cash value reimbursement, be aware that you will only get the cost of what the item is worth when you claim, not when you bought it. Worth bearing in mind if you have older items that might have changed in price since your purchase.

Coverage Limits

Do you know exactly how much it will cost to replace every single item in your home? If not, take an inventory to help you decide on your coverage limits. The coverage limit you choose is the limit the insurance company will pay minus your deductible.

For example, if your limit is $50,000 and you have a $1,000 deductible, then the insurance company will pay you $49,000 to account for your deductible. In some cases, insurance companies may try to pay you the absolute bare minimum and not the full amount of cover you are claiming for. In this case, look for a home adjuster near me to find a home adjustment company who will work with you to get the best price for your claim and avoid being underpaid by your insurance company.

There may also be individual limits on items in your home, for example, $1,500 per item, meaning if you own something more expensive, such as a laptop or gaming setup, you may need to purchase an additional cover to account for this.

Understanding Exclusions

It is always worth checking what exclusions apply in your policy before you agree to purchase it. If you are moving, your contents will likely be insured for the process. However, not all policies cover damage made by the movers, meaning you may need to purchase a movers insurance policy. The same applies to putting items in storage.

Also, check any limitations such as weather damage or natural disasters. If you live in an area prone to flooding or experience frequent hurricanes or inclement weather that can cause damage to your home, be careful of the wording of your policy to ensure you are still covered should an extreme weather event destroy all your belongings.

This also applies to Mold in your home damaging the property or your belongings and sewer lines that may back up and cause damage inside your property.

If you are unsure of exactly what your policy covers, make sure to consult with an insurance agent to fully explain what you are covered for, and what falls outside of the policy. It may be that you need to add or remove certain clauses to make sure you are suitably covered, especially if you own items of a higher value or you are at risk of losing your personal belongings due to high crime rates, weather conditions, or the standard of living in your home.

Consult with an experienced insurance agent on these issues.

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Good luck!

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/