What You Need to Know About Your Home Insurance Policy
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UPDATED: Dec 9, 2020
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Understanding your home insurance policy with all of its legal language, insurance forms, and different coverage sections can be daunting. Despite being difficult to follow, before you purchase a home insurance policy you should have some understanding of what it says. All of the home insurance policy is important, but it is particularly good to know:
- When does homeowners insurance coverage begin?
- What are the home insurance policy limits that cap damage payouts (and are they enough to cover you)?
- What type of home insurance coverage is included in the policy?
- What is the process for filing a claim?
- How can you lose your home insurance policy coverage or have your policy cancelled?
Understanding your home insurance policy coverage is critical. Whether you want to make sure you are getting the best deal on home insurance, see if you need to add additional coverage to protect your home and possessions, or prepare to file claim, you need to know what the terms of your home insurance policy are.
TIP: You should be able to browse through your home insurance policy and find the important sections based on their headings. However, if you need help understanding the legal language of an insurance contract,click here to send your question to an experienced insurance professional.
Home Insurance Policy Coverage
To understand your home insurance policy, you should start with your declarations page. The declarations page is unique to every home insurance policy, and lists the specific details that are important for you to know. Review the declarations page for the following basic information:
- Name of the insured, the address of the insured premises, the effective dates of the policy, and the policy number. The effective dates give you the date and time your homeowners insurance policy coverage begins and ends. All of this is important information and will be unique to every home insurance policy.
- The declarations page also lists your home insurance policy deductible. This is the amount that will be paid first or deducted from any claim prior to being paid.
- You will also see your mortgage clause. These clauses list your lender’s name and address. Make sure that this information is correct. Also, in the event that you should pay your loan off early or refinance with another lender, make sure your mortgage clause gets updated. This lender may be listed on any claim check you receive as an additional payee (as they have interest in the property as collateral for any loan that you have). They will certainly be listed on any total loss claim check as well as be notified in the event your insurance is cancelled for non-payment or non-renewal.
- What your insurance premium rate is. This amount will be how much you pay per year or month for your coverage.
TIP: If your declarations page does not accurately reflect your coverage, then you need to notify your insurance provider immediately!
Home Insurance Policy Coverage Limits
Your home insurance policy’s declarations page will list the six coverage parts and their individual insurance limits. The limit listed is the maximum the home insurance company will pay under each coverage type. The following is an example of what you may see on your policy:
|Coverage B- Other Structures||$35,500|
|Coverage C- Personal Property||$248,000|
|Coverage D- Loss of Use||$71,000|
|Coverage E- Personal Liability||$300,000|
|Coverage F- Medical Payments|
When you look over the home insurance policy coverage limits, you need to make sure they are sufficient to cover your home and possessions. For example, if you have the above coverage with $300,000 of personal possessions in your home, then you will want to consider purchasing additional coverage.
TIP: Coverage limits are one of the most important parts of your policy! Know them and extend or reduce them according to the value of your home and possessions.
Home Insurance Policy Riders
In addition to the information listed above, the home insurance policy’s declarations page also lists any riders attached to your policy.The riders, or endorsements, represent the extra coverage you bought to supplement your policy. Make sure that your homeowners insurance policy lists only the riders you were quoted for and agreed to include in the premium.
TIP: If you purchased a valuable item insurance rider (more commonly known as a scheduled (?) personal property endorsement) to protect your more valuable possessions such as furs, jewelry, collections, expensive guns or cameras, make sure it is listed on your declarations page. Be sure the amount reflects the value of your items.
Your Home Insurance Policy Coverage
Aside from protecting the home itself, your home insurance policy provides a variety of coverage to protect you. Look through your policy for the following:
- Protection for other structures in your yard (fences, sheds, pools, etc) as well as the contents in the home.
- If your home is damaged to the point that it is no longer inhabitable, there is loss of use coverage that will pay for you to live in a hotel as well as other reasonable expenses while out of your home.
- The personal liability sectionof your homeowner’s insurance policy pays for incidents or damage that you or your household members were negligent in causing. This coverage also provides and pays for legal representation in the event you are sued due to your negligence.
- Your home insurance policy also provides for medical payments in the event someone is injured on your property. If your child’s playmate falls and breaks their arm while playing on the swing set in your yard, this coverage will assist you in the event you are asked to pay for the resulting medical bills. Normally it has a per person limit and a per occurrence limit.
TIP: Have your insurance agent go over each section of the policy with you to make sure you understand your coverage and your limits of insurance. Discuss any “what if” questions with the agent to alleviate any potential gaps in coverage that may exist for an odd risk you may have at your home such as your coin collection worth $10,000 or your over sized garage that if destroyed would cost more than the limit.
Homeowners Insurance Policy Exclusions
Of course, your home insurance policy does not cover all types of losses. There are some things that are specifically excluded and are not covered. Make sure that you turn to the section under every coverage part titled “exclusions” and understand what is not covered. Some other more common exclusions to your homeowners insurance policy are:
- Sewer back up that causes damage
- Water Damage due to flood, surface water, waves, water below the surface of the ground.
- Wind storms or hail- Loss from wind storms or hail
- Earth Movement-Earthquakes, landslide, erosion, mudflow, etc.
Some of these more common exclusions can be covered by adding a rider to your home insurance policy or obtaining a separate policy to cover the risk. Make sure you discuss any risk or exposure you may have to any exclusion with your insurance agent so that he or she can design or tailor a homeowner’s insurance policy for that risk.
When you purchase a homeowner’s policy, make sure that you understand these details, and get any other questions answered. To start shopping, .