For most of us, the biggest investment in our lifetime is our home. The best way to protect that investment is to purchase homeowner’s insurance.
Homeowner’s insurance protects you from catastrophic loss. A simple example of catastrophic loss would be a total fire and your homeowner’s insurance would definitely pay your policy limit in that event.
However, the policy you purchase may not cover other causes of loss that may arise during the lifetime of homeownership. For example, flood by simple definition is not covered under any homeowner’s policy. Also, in some cases, depending on the form of homeowner’s insurance chosen, theft of personal property (household goods) may not be a covered peril. Earthquake, war damage, nuclear hazards, mechanical breakdown, mold, earth movement or landslides and foundations are almost always excluded from homeowner’s insurance. As you consider the various types of policies, ask many questions so that you are clear on exactly what your policy will cover in any event.
While most homeowner’s insurance policies cover your structure for fire, windstorm, lightning, hail damage, and vandalism, it also includes coverage for your personal property and liability for your premises. The policy can be endorsed for “extras” to include coverage on high valued jewelry and furs, replacement cost coverage on household goods (basic coverage is valued at actual cash value), television and radio antennas, glass coverage, computer coverage, as well as coverage for a small home office.
When insuring your home, one of the least known points taken into account is the true value of your home in order to coincide with the valuation of your policy. Your homeowner’s insurance policy may be valued at either replacement cost or actual cash value. If you’ve chosen the replacement cost form, your home should be insured to one hundred percent of what it would take to replace your house from the ground up and totally new. The actual cash value forms relate directly to replacement cost value less depreciation. All policies contain a clause in the terms and conditions called a coinsurance clause. This clause basically states that if your home is not insured to the value outlined in the policy, you may be penalized in the event of a loss. As inflation rises, so does the costs of construction. Be sure from the beginning that your home is insured correctly.
In the event of a claim, the payment for your loss will be subject to a deductible. Most policies start with a one percent deductible, meaning the deductible is determined at one percent of the insured value of the home. A lower deductible can be purchased for an additional premium. You must weigh the cost of the lower deductible versus a higher deductible at no charge. If your home is insured on the higher value end, you may be better served with paying for the lower deductible. The choice is yours to make.
Above all, consult with a retail agent that specializes in homeowner’s insurance. Your agent can counsel you as to the intricacies of contract terms and conditions as well as any exclusions mandated on the policy. He or she can assure that you’ve selected the most comprehensive policy to suit both your insurance needs as well as your pocketbook. As a responsible homeowner, you can rest knowing that your investment is well protected.