You probably heard from friends that getting homeowners insurance is a good idea. However, if you haven’t read an existing policy or bought one yourself, you probably don't have a clear idea of how it really works.
If you're considering getting homeowners insurance, asking the right questions is key to selecting the policy that best suits your needs. Below are the top ten questions to ask about your home insurance:
What is homeowners insurance?
In essence, a homeowners insurance policy is a form of casualty and property insurance that covers and protects your home and its contents in the event of some disasters and loss.
If there are aspects you want to know and understand better, don't hesitate to ask your home insurance agent about it. Your agent can explain things in-depth and can address any questions or concerns you may have.
Will insurance cover all types of disasters?
There’s a common misconception that homeowners insurance can protect homeowners from every disaster both natural and caused by human error. Unfortunately, this is not the case.
Typically, a homeowners insurance policy will only cover specific types of perils, depending on your policy's level and scope. Basic coverage often includes losses and damages from smoke, hail, lightning, vandalism, windstorm, explosion, and theft.
Are all insurance policies the same?
If you have been shopping around, you probably already know that not all home insurance policies have been created equal. Basic policies cover normal loss activities. They are the most affordable and the most common. If you're still building your insurance portfolio, starting with a basic policy would be a good idea.
If you want to increase your coverage or protect your home from other perils beyond what's typically covered, you can purchase add-ons or opt for a higher insurance level.
Will insurance cover earthquakes and flooding?
While homeowners insurance offers protection for common perils, standard policies generally exclude earthquake and flood coverage. It is possible, however, to purchase earthquake or flood insurance separately.
It is also important to remember that insurance policies, however broad, have limitations. This means that aside from earthquakes and flooding, power failure, nuclear explosion, and war damage are also not covered.
How much personal property coverage is ideal?
Ensure you have enough coverage to replace your personal property such as appliances, furniture, and clothes if they get destroyed in a fire or other disasters. Usually, insurance companies offer personal property insurance equivalent to 50%-70% of the dwelling coverage.
Conducting an inventory is the best way to identify the right amount of personal property coverage you’ll need.
Is it advisable to increase my additional living expense coverage?
Additional living expense (ALE) is a provision in standard home insurance policies. This part of the policy pays for temporary living expenses if you need to stay someplace else due to severe damage to your home.
ALE coverage covers hotel bills, meals, and other expenses beyond the customary living costs. While ALE coverage can vary from one company to another, most policies offer coverage that's at least 20% of the dwelling coverage.
How much liability insurance will I need?
Liability coverage protects against lawsuits for bodily injury and property damage that you, your family members, or even pets may cause other people. The liability insurance pays for legal expenses, including any awards by courts. The liability insurance may also cover medical bills if someone gets injured in your home.
Is there a way to reduce the monthly premium?
One of the easiest ways to reduce the monthly premium is to increase the deductible. Some insurance providers may offer special credits for modern electrical systems and plumbing, alarms, and other safety installations, so this is another thing you should discuss with your provider.
Am I eligible for discounts?
Discounted premiums are often offered to seniors, students, and retirees. The provider may also provide discount offers that are not advertised, so don't hesitate to ask!
Will the policy cover replacement cost or actual cash value?
If covered perils damage your home, you will get compensation for either the replacement cost or the actual cash value. However, most policies cover home replacement or repair at replacement cost while personal property in actual cash value.
Not all homeowners insurance policies are the same. It’s also safe to assume that not all will be the right fit for you. Fortunately, asking the right questions can get your search off to a superb start.
About the author: Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.
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