If you own a house, you most likely have a homeowners insurance policy. I say most likely, because I have met some people that own their home free and clear, and choose not to have home insurance because they are self-insured. But most people have a mortgage, and the mortgage company will require an insurance policy to cover their asset. But have you ever gone thru your homeowner insurance policy? I would like to take a minute and go over the 6 main sections that are in every home insurance policy.
The first section is the Dwelling replacement coverage. This is what a rebuilding software program has figured as what it would cost to rebuild your home. This is not what the home is worth if you sold the home. When you buy a home, you are buying the home and the land. The land has a value. When a home is rebuilt, there are many things that might be re-used, like the foundation and the well or water pipes to the house. Make sure you notify your insurance agent when you upgrade the house, like a new kitchen or finishing the basement. It is just as important that you are not under insured as it is to not be over insured. If your house replacement is $150,000, and you have it insured for $200,000, you are paying too much. The insurance company will not just send you a check for $200,000. They will rebuild your house just like it was, for $150,000. Some insurance companies will cover rebuilding to a certain percentage above the replacement value.
The next section is the amount for separate structures. This will cover any structures that are not attached to the house. Examples are detached garages, a shed, or a barn. This amount is usually 10% of the dwelling replacement number for the minimum. If you have separate structures that would cost more than this amount to replace, your agent can increase this number, without raising the amount on the main house.
The third section on a homeowner insurance policy is personal property. This is everything that you own inside the house. These are items that you can prove that you owned. I can say that I had a 60 inch plasma tv in the house when it burned down, but unless I can prove that I had it, with a receipt or photos, I will be unlikely to get another one. Take the time to write down or videotape what you have. After a fire will be too late to remember what you had, and you will probably be too stressed to remember everything. Also check your policy for limits on certain items. For example, the policy might have a jewelry limit of $1,500 per item. So if you have a piece of jewelry that is $2,500, you would only receive $1,500, unless you had a separate jewelry rider for that item. There can also be limits on computers, gun collections, and artwork. Check your policy and call your agent for more information.
The fourth category is listed as loss of use. If your home is damaged so that you cannot live in it, you have money to pay for a hotel or rental home while your home is being fixed. This is also important if you have a rental property that is damaged. The insurance will pay you the monthly rent that you cannot collect while the home is being rebuilt and the tenants cannot live there. Make sure this coverage is in there for your rental properties.
The fifth section in a homeowners insurance policy is personal liability. We live in a time where you could be sued for almost no reason at all. When you are taken to court, and are personally liable for something, the personal liability coverage kicks in. Some policies are different, so ask your agent to clarify this point to you. The default coverage is usually $100,000, but check the price increase if you raise that to $500,000 or even $1,000,000. It is usually a small increase for more coverage. You could also consider an Umbrella policy, which would cover you if the expenses are more than your personal liability coverage. A $1,000,000 Umbrella can be as little as $100 a year.The final section in the homeowner insurance policy is guest medical. This amount is available if a guest is injured on your property. Again, ask to see the price difference to raise it from the default coverage of $1,000.
You will notice that flood insurance is not mentioned in the above breakdown. Flood insurance is a separate policy. If you are in a flood zone, then you will be required by your mortgage company to have flood insurance. Flood insurance is provided thru FEMA. www.floodsmart.gov . With flood insurance, you select the amount of coverage you would like on your dwelling and your persoanl property.As you can see, the homeowner insurance policy is easy to understand once you understand what you are reading. An insurance agent should be able to explain any questions you may have. So go pull out your home insurance policy, and make sure you have the correct insurance coverage.
IS YOUR HOMEOWNERS POLICY THE RIGHT FIT?
In most of our lives our home must surely rank as amongst the most important material things. There is certainly unlikely to be anything more worthy of our careful protection. After all we all spend so much time searching for that perfect property and considering so many things, not least that elusive but all important ‘wow' factor. Our homes almost become part of who we are so the devastation of serious damage can be a tough thing to take. Lessening that blow with a good home insurance policy should therefore be something we don't take lightly.Making sure you end up with the right policy to fit your needs and that you feel is cost-effective can be a complicated process though, it would be nice to think you could take the easy route and default on a standard policy but, really, there's no such thing. You'll need to check though any prospective insurer's levels of cover and various exclusions. But let's start by breaking the subject into the two principal types of cover – Building Insurance and Home Insurance.
Building Insurance - Building insurance should cover more than simply the main building and include any outbuildings such as garages as well as gates, patios, sheds and fences. It's important to give any exclusions or clauses, and there will almost certainly be quite a few, a thorough examination. Make sure you know what's covered and what isn't. Don't over-insure yourself; the sum should be the cost to rebuild rather than what the property is worth. In certain cases the insurer will only pay out the cost to rebuild anyway. A rebuild cost should be pretty cheap and easy to come by so make sure you get it right. Also take into account the likelihood of rebuilding costs increasing over time especially if you make any modifications. A worthwhile piece of advice for cutting costs is not to pay with a direct debit, it could mean being charged as much as 30% interest. Think about paying with a 0% on purchases credit card.
Contents Insurance - Once again it is important to be certain that you are insured for the right amount. Try compiling a full check list of everything, it may seem long-winded but is definitely worthwhile. It's quite possible that your insurer will put a limit on individual items, if this is the case and a single item is worth more than an imposed home contents limit try to negotiate an increase or, failing this, you'll have to insure it separately. Make sure your contents are insured beyond the basic theft and fire cover and encompass other threats like storms or flooding. A decent money saving idea is to look at the possibility of a combined deal that covers both contents and building, this might be offered at a reduced rate and should obviously speed up the process. Don't just plump for a combined deal for convenience sake though; a good policy for contents could be teamed up with a less impressive deal for the building or vice-versa.
TWO TYPES OF COVERAGES
In most of our lives our home must surely rank as amongst the most important material things. There is certainly unlikely to be anything more worthy of our careful protection. After all we all spend so much time searching for that perfect property and considering so many things, not least that elusive but all important ‘wow' factor. Our homes almost become part of who we are so the devastation of serious damage can be a tough thing to take. Lessening that blow with a good home insurance policy should therefore be something we don't take lightly.Making sure you end up with the right policy to fit your needs and that you feel is cost-effective can be a complicated process though, it would be nice to think you could take the easy route and default on a standard policy but, really, there's no such thing. You'll need to check though any prospective insurer's levels of cover and various exclusions. But let's start by breaking the subject into the two principal types of cover – Building Insurance and Home Insurance.
Building Insurance - Building insurance should cover more than simply the main building and include any outbuildings such as garages as well as gates, patios, sheds and fences. It's important to give any exclusions or clauses, and there will almost certainly be quite a few, a thorough examination. Make sure you know what's covered and what isn't. Don't over-insure yourself; the sum should be the cost to rebuild rather than what the property is worth. In certain cases the insurer will only pay out the cost to rebuild anyway. A rebuild cost should be pretty cheap and easy to come by so make sure you get it right. Also take into account the likelihood of rebuilding costs increasing over time especially if you make any modifications. A worthwhile piece of advice for cutting costs is not to pay with a direct debit, it could mean being charged as much as 30% interest. Think about paying with a 0% on purchases credit card.
Contents Insurance - Once again it is important to be certain that you are insured for the right amount. Try compiling a full check list of everything, it may seem long-winded but is definitely worthwhile. It's quite possible that your insurer will put a limit on individual items, if this is the case and a single item is worth more than an imposed home contents limit try to negotiate an increase or, failing this, you'll have to insure it separately. Make sure your contents are insured beyond the basic theft and fire cover and encompass other threats like storms or flooding. A decent money saving idea is to look at the possibility of a combined deal that covers both contents and building, this might be offered at a reduced rate and should obviously speed up the process. Don't just plump for a combined deal for convenience sake though; a good policy for contents could be teamed up with a less impressive deal for the building or vice-versa.
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by Larry
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