As long as you are paying off a mortgage you will be required to carry homeowner’s insurance. Even when that mortgage is paid off it still a smart idea to keep that coverage going. Many people who sign up for homeowner’s insurance when they first moved into a house try and get just a bare minimum coverage. That makes sense considering all the other expenses that are going out. However, that bare minimum might not cover everything you expect it to. Here’s what to look for in your homeowner’s insurance policy:
Replacement Cost Vs Fair Market Value
The minute you sign the receipt for any item it starts to depreciate. That is true for a car and a diamond ring. When a homeowner’s insurance policy covers the cost of lost property it may do it at “fair market value.” That would be the price that the item is worth on the day that it was loss or destroyed. Of course, if you had to go out and replace that item you would be spending a lot more than that depreciated cost. If you want to be protected all the way, then your policy should be about replacement costs.
Lost Property from A Car
When a car is broken into and personal property is stolen the question becomes which insurance policy pays for: homeowners or auto? The first issue will be to determine where the break-in occurred. If the car was parked on your property, then your homeowner’s insurance might cover. For anywhere else, it will be the auto policy. There are some insurance policies that make a distinction about what type of property their cover. If you install a car radio that is stolen, then it might not be covered by your homeowner’s policy.
Natural Disasters
This is where you really need to study the details of your homeowner’s policy. The vast majority of policies cover damage caused by lightning, windstorms and hail. However, not all of them will cover damage from flooding. A lot of folks that got damaged from hurricanes discovered this the hard way. In other words, the insurance covered the roof that was blown off but not the basement that was flooded even though it was the same storm. You can buy additional policies for specific disasters like flooding and earthquakes. Also, be on the lookout for coverage that covers falling items like trees or smoke damage.
Fire Coverage
A home that is lost to a fire is the most common type of insurance claim that is filed on a regular basis. Most policies will cover the cost of rebuilding the home but it might not be the true value of the home. In other words, that insurance is just paying for the value of the structure not the entire property. You should also be on the lookout for what living costs might be covered like hotels and restaurants.
Personal Injury
If you slip and fall on the ice outside of your front door, then you may be covered by your own individual health policy. However, if someone is visiting you slips and falls on that ice, then it may be your homeowner’s insurance policy that pays for their medical expenses. There is usually a limit to how much payments can be given out. This is something to look into especially if you have a dog. You have to be aware of the potential dog bite and what kind of medical bills that might generate.
It’s always a good idea to conduct a annual policy review just to make sure that you are covered for what you think you should be and that you’re paying the best premiums.
