Homeowners insurance offers you protection in the circumstance that your home, or the contents inside your home are damaged. As a homeowner, most mortgage companies will require you to have insurance, but do you really know what it covers? It is important to understand your policy.
Basic homeowner’s usually insurance covers damages to the structure of your home, your possessions, (usually called your contents) additional living expenses and also usually includes liability protection. It is vitally important to ask your agent how these items are covered in your policy! Too many people just ask for the lowest price premium without realizing that this often means a reduced level of coverage for their home.
When disaster strikes, no one is happy with saving a few dollars in premium, but not have the coverage those few extra dollars would have given them in their time of need.
Here are the basic coverages that you should have in your policy:
STRUCTURE
You want to be certain that your insurance covers the repair of your home if it is damaged by disasters. These disasters are listed in your policy, such as fire, hurricanes, lightning, hail, etc. Basic homeowner insurance will not cover damage by floods or earthquakes. It’s important to remember that most policies deem water damage a “flood” if the water has touched the ground. So even if it’s rain falling from the sky, if it touches the ground before it enters your home then it would not usually be covered unless you have a separate flood policy. For example, even a storm drain on your street backing up and flooding your home would not be covered without a flood policy. So even if you do not live in a flood zone you need to consider getting coverage by purchasing flood insurance.
When you choose your coverage in your homeowner's policy, make sure to purchase enough to cover the rebuilding of your home. In other words, insure your home’s replacement cost. There are some policies that will only cover your home's “Actual Cash Value” (ACV) not replacement cost. This is the same concept as saying that the car you bought last year is no longer worth the amount of the purchase price because a car’s value declines rapidly as soon as you drive it off the dealer’s lot. Those with an ACV policy are often left without adequate funding to repair their homes after a loss. Be sure to verify with your agent that you have a Replacement Cost policy and what the limits are for the replacement of both your home and your contents.
YOUR POSSESSIONS
The possessions that you own inside of your home are covered in basic homeowner’s insurance. These are general referred to by your insurance company as your contents. Your furniture, clothes, electronics, and other personal belongings are covered if they are stolen or damaged by any of the disaster listed in your policy. Generally, coverage is 50 % of the amount of your home but again it is important to realize that you’re asking for a lower premium may have caused your agent to quote you a much lower level of coverage, and thus you might have less coverage than you actually need in case of a loss in y our home. In addition, make sure the coverage you have is sufficient by making a home inventory of your possessions. Many policies will require you to have an inventory of what is damaged in a loss, which can be hard to do if say a fire has damaged your contents beyond recognition. Take pictures and label items in your home, or better yet grab your smartphone and videotape the inside of your home from top to bottom.
ADDITIONAL LIVING EXPENSES
Some policies will also have a provision for additional living expenses (referred to as ALE by your insurance company) which is coverage that helps to cover the costs that you would incur if you had to live away from your home due to a disaster. This could include hotel bills, restaurant meals, and other costs. This is usually 20 percent of the amount of your home. It is important to keep in mind that Additional Living Expense coverage has limits and that use of this benefit is left up to the adjuster in a claim to approve and this is not guaranteed unless the adjuster feels that you could not live in your home while repairs take place. As always it is wise to inquire with your agent what the level of coverage and limits for ALE are in place for your policy.
LIABILITY
Liability will cover you in the instance that someone gets injured while at your home. If you are sued for an accident that occurs in your home, liability will often cover legal fees and the settlement if you are not negligent in creating conditions in your home that led to the accident in the first place. Many liability policies will cover you also if you cause damage or injury to another person on their property. It is very important to protect yourself and your family with liability coverage. Because we have become a country in which lawsuits are common it is important that you know how much coverage for liability you have purchased with your policy.
Review your policy to be sure you have the coverage that you need. There are many other additional coverages that can be added to a basic homeowner’s policy for a small amount of extra premium. Speak with your insurance agent should you have any questions or need to make any changes to your policy, but most of all, know what it is that you have purchased! Insurance may be one of the biggest and most important purchases you make, so don’t skimp and remember that being informed about what you are buying is very important.
ServiceMaster Restoration works with all insurance carriers if your home experiences a disaster. We are experts known for our consistency, speed, and high standards of customer service. Contact us today at (704) 324-8528.
