Home insurance policies can be a lot to navigate. You might think you’re protected in certain circumstances—but your assumption isn’t always true. These seven basics of home insurance can help you better understand your policy.
Understand market value
You might think: If your home is damaged, insurance will cover the cost to repair or rebuild.
You should know: If your policy only covers “market value,” your insurance may not cover the cost to return your home to its original state. Things like expensive upgrades you’ve made—like a marble countertop—or historical details, such as original flooring, could cost more to rebuild than the home’s current value. A market value insurance policy only will cover repairs or rebuilding up to the cost of a comparable home on the open market. For insurance that would replace your home exactly the way it is now, consider “guaranteed replacement coverage.”
Protect against natural disasters
You might think: Your home is covered for damage caused by a wide range of weather and calamities, including fire, hail, hurricane, lightning and more.
You should know: Most plans do not cover damage caused by flooding or earthquakes. Additional protection is necessary to guard against these natural disasters.
Determine liability limits
You might think: Your home insurance covers furniture, clothing, appliances and most other possessions inside your home if they are stolen or damaged in a calamity.
You should know: Expensive items, such as jewelry, art and collectibles, usually aren’t covered for their full value under a standard home insurance plan. To do so, ask your agent about raising the liability limits on your policy, or about adding a “rider” to your policy. It’s a good idea to review your home insurance policy each year.
Get help with living expenses
You might think: If you need to live away from your home while repairs are under way because of an insured incident, home insurance will help cover the cost.
You should know: Most home insurance policies include coverage for Additional Living Expenses to help pay for added costs incurred while living away from home during repairs. In addition to paying for hotel stays, rent and restaurant costs, Additional Living Expenses can also cover storage fees, pet boarding and even additional mileage costs if your temporary residence requires a longer drive to work or school. If you rent out part of your house, lost rent may be covered as well.
Cover theft
You might think: Your home insurance covers items stolen from your house.
You should know: Your coverage may extend even further than you think. Items stolen from your car, whether in the driveway or away on a road trip, are likely to be covered. Dependents and immediate family members may be covered away from home as well. So if your child is away at college and their laptop is stolen from their dorm room, your home insurance may pick up the tab.
Pay liability lawsuit damages
You might think: If you’re targeted in a liability lawsuit and lose, your home insurance will help cover the cost.
You should know: An accident may exceed the liability coverage offered by your plan. Want more protection? An umbrella policy will give you added liability protection. Learn more about an umbrella insurance policy.
Define your property
You might think: Beyond your house, additional structures on your property, such as a shed, gazebo, fence or detached garage, are covered by most policies.
You should know: The land itself around your home is usually not covered by your home insurance policy. If a tree falls and damages a covered structure on your property, your insurance will usually pay for the building to be removed. However, if a fallen tree does not damage any structures, your insurance probably won’t cover the tree’s removal.
Just like the decor in your home, every home insurance policy is unique. Don’t wait until you make a claim to understand your coverage. Read your policies, or meet with your agent to ensure that your coverage stays up to date with your needs.
