There are six different things inside of your Homeowners Policy that you really need to pay attention to. If you make a mistake here, it’ll cost you just tens or hundreds of 1000s of dollars, whenever you have a claim. These are very important things that a lot of times a salesperson hasn’t taken the adequate time to help you to understand what it is you’re buying, and what the implication can be to you. On claim day, don’t focus so much on how much money you’re saving upfront. You need to focus on these coverages. That way, whenever a claim happens, you won’t be losing all the savings you had accumulated.
Coverage A or Dwelling Limit
That’s the first thing we’re going to talk about is how much you will insure your home for. Now, sometimes that’s going to be dictated either by the contract. The replacement costs are, the insurance company is saying, this is what it’s going to cost to rebuild this property. On a homeowner’s policy, we don’t insure it for what the market value is. If you buy it for $350,000, but it’s going to cost you $400,000 to rebuild it, we’re going to insure it for the $400,000. Why is that? because the policy is designed to rebuild that home, not buy another one, or just give you the money. It’s not designed just to protect you against your mortgage balance. It’s designed to protect you and your family to make sure that if something happens, you can rebuild that home.
Homeowners Vs. Dwelling Policy
We’ll discuss the difference between homeowners’ and dwelling policies. You’ll be well-informed about what you need to make sure your home is properly protected.
Personal Property or Contents
The second thing that we’re gonna talk about is going to be content, sometimes it’s called personal property. Those are the stuff inside of the house and it’s also the stuff that’s outside the house and the yard. Like, kids’ toys, lawnmowers, and tools that are out in the shop, all things that are movable are included as personal property or your contents.
A homeowner policy is going to be automatically set at either 50% or maybe 75%. Depending on the type of policy you have, review that and make sure that it’s enough. A lot of times we’ll see that number, let’s say that you insure your home for $500,000. Well, that contents limit can be $250,000, start thinking about all the different things that you have. Understand that in a homeowner policy, that’s just a part of the policy, and doesn’t cost any to have that limit. If you want to raise it, it will cost you more to increase that but not very much.
Other Structures
The third thing is going to be other structures, sheds, fences, and a deck that you have. Things that are not attached to the house, but that are out there on the property that you own. If you want coverage for that, it’s going to be an automatic amount but you can increase that. Make sure that you’ve got enough insurance for those things. Building costs are very high, so make sure you have insurance on those structures you have on your property.
Loss of Use
This is a very important part of the coverage. If you have a claim that’s going to displace you from your house, make sure that you have this on your policy. Loss of use is going to be automatic coverage that they’re going to give to you. If you are displaced from your home, it will give you emergency cash so that you can live elsewhere. Get a hotel or if you’re going to be out of your home for a long time, you can rent a place. Obviously, if you have a claim you could potentially go live with family or something like that. Why do that if your policy will pay for you to live somewhere else? the loss of use will be covered so that you don’t have to worry anymore.
Medical Payments
The next thing is going to be medical payments coverage. Medical payments is no-fault liability coverage for you for anybody that’s in your home or gets hurt somehow. Maybe you’re on vacation or something like that and someone gets hurt, it’s not your fault, but you just want to cover it underneath your policy. Usually, this is a small limit of $5,000 or $10,000 but this is a coverage that’s in there.
Liability Insurance
To me, this is probably the most important but often overlooked. Liability Insurance is going to be a limit of coverage designed to protect you in case someone either gets injured because of your actions or brings a lawsuit against you. This is going to protect you and your assets, the retirement that you’ve built up whenever you retire. It’s going to protect all of that and also provide you with a legal defense.
This is going to protect and provide you with an attorney for legal defense. Liability insurance has a limit, and it’s going to be something like $100,000, $300,000, or half a million. You may buy an umbrella policy to buy an additional half million or million or even higher, depending on your needs. So this coverage here, make sure you’re not picking the lowest limit, if you’ve got a house, that’s valued at $300,000 or more than that, it just costs so little to buy additional coverage here, this is the most inexpensive part of your policy.
Make sure that you’re buying adequate coverage
Because if you have a claim, you want to make sure that you’re protected, that your assets are protected because there’s nothing that can set you back financially, and devastate a family more than a liability claim that’s not covered correctly. Because if you don’t have enough coverage here, you’re going to have to take care of it out of your pocket. If not, then you know, an attorney or court decides to garnish your wages or even maybe force you to sell your home and force you to liquidate some of your assets so that you can then pay for the damages that you have caused.
What is an umbrella policy, and do you need umbrella coverage for yourself? This post covers everything you need to know about having a personal umbrella policy. If you’re looking to make sure your liability insurance will cover what you need, look no further!
That’s the six different things that are inside that homeowner policy, the basic coverages that are inside there. You need to pay attention to these and make sure that you pick wisely so that you don’t have a bad day on claim day.
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Beaux Pilgrim, CEO
Beaux Pilgrim
Reed Insurance