Once you buy a home, you really don’t own that home unless you paid cash for it up front. As long as you are paying off a mortgage, the lending company actually holds the deed to your home. That’s okay, though; You can still call yourself a homeowner. In fact, you’ll have to take out a homeowner’s policy as a condition of the mortgage agreement. As with your auto insurance policy, you will want to cover the basics such as damage and liability. When thinking about your premiums “the higher the deductible, the lower the premium” rule applies. However, there are some things that you think you might be covered for but aren’t. If you do have a homeowner’s policy, then it might be time to give it a review and make sure you are indeed fully covered. Here’s what to look for:
Guaranteed Replacement Value Insurance
It is a challenge to get through a week’s worth of news without seeing some kind of devastation due to storms, fires or other disasters. Hopefully, all of those homeowners all have guaranteed replacement value insurance. This will provide the funds needed to rebuild a home that has been wiped out in a disaster no matter how expensive that rebuilding might be. Many homeowners assume this would happen automatically but that is not the case with a lot of policies. The value of your home might have gone up since you bought it and it could be more expensive to build. The guaranteed replacement policy makes sure you’re covered.
Loss Of Use
If you have to move out of your home while it is being repaired or rebuilt, then you’re going to have to live somewhere else, right? The Loss of Use clause provides living expenses to cover rent on a temporary home even if that becomes an extended hotel stay.
Liability insurance is there to protect you in the event someone files a claim against you. For instance, someone could visit your home, slip in the kitchen and then sue you. If you have a dog or swimming pool or a teenager living in the house, then the potential for claims increase. Most homeowner’s insurance policies cover up to $300,000 in liability damage but you can always add more.
A homeowner’s insurance policy will cover a home that is destroyed in a fire. However, those same policies don’t cover for damage caused by flood, earthquake, sewer or storm-drain damage. If you live in an area that is vulnerable to those types of conditions, then you might need to obtain a special policy that provides coverage for those disasters. Keep in mind that flood damage is different than wind damage even though it might happen in the same storm. Make sure you’re covered for both.
If you have something of particular value in your home such as a piece of art or jewelry, then you might want to add an endorsement to your policy. This basically establishes ownership of that item and has an appraised value attached to the policy. In the event of loss or damage, there shouldn’t be any discussion of what something is worth.
Are you covered?