What Does My Homeowners Insurance Policy Actually Cover?
Your home is probably your most valuable asset. You worked hard to be able to buy it and you have comprehensive homeowners insurance to cover it. Or, do you? Homeowners insurance can be confusing, especially for a new homeowner. Knowing what's covered and what's not can help you make important decisions and save you from unpleasant surprises down the line.
The value of your home
One common misconception about homeowners insurance is how much coverage you actually have. Many people think that if their home is destroyed, their homeowners insurance would reimburse them the market value. Unfortunately, that's not the case. Most homeowners policies cover the cost to rebuild, which can be significantly lower than the estimated market value.
Even the cost to rebuild might exceed the cap on the policy. Most homeowners policies have built-in limits. You can purchase additional coverage to make sure you have enough to pay for the full cost.
Changes to the building codes can mean more money out of your pocket too. Your homeowners policy doesn't cover additional cost from mandated upgrades in undamaged sections of your home unless you have a specific rider. (In most states there is ordinance or law coverage equal to 10% of the Coverage A Dwelling limit.)
Also, don't forget that not every type of loss is covered. For instance, damage or total loss due to flooding isn't covered. A separate flood insurance policy is required for that.
The value of your belongings
The good news is that your homeowners insurance policy does cover your belongings as well as the structure. But, most policies won't give you $1000 to replace your two year old plasma TV. The typical homeowners insurance policy reimburses for loss to belongings based on something called actual cash value. Actual cash value takes depreciation into consideration. So, while it might cost you $1000 to replace your TV, you will actually be reimbursed what it's worth today. You will not be reimbursed the cost when you bought it or the cost to buy a comparable replacement. However, you can add optional replacement cost coverage that will give you the amount needed to buy a new, comparable item.
Valuable items such as furs and jewelry have a cap of $1000 for the basic policy. Additional riders are available if you need them.
Save on out of pocket expenses
Appliances - Did you know that if your appliances are damaged by an electrical surge that your policy probably covers that? Read the details of your policy to be sure, but that lightning strike doesn't have to mean you bear the cost to buy new appliances.
When you're assessing your current policy or buying a new one, be sure to carefully evaluate the limits and caps. Don't hesitate to buy additional coverages to ensure your home and your belongings are secure. If the worst should happen, you'll be glad you did. Take a few minutes to get a free, no obligation homeowners insurance quote, and see just how affordable our rates can be.