Know What Your Home Insurance Covers
Many people are aware of how important it is to consider their homeowners insurance when it comes to finance. However, you may not be exactly clear on what your insurance covers when you look into a policy. With so many options to think about, it is useful know what types of perils homeowners insurance will cover under various kinds of policies so that you can adequately prepare the family’s finances and get all the coverage you need.
Dwelling and Structures
Of course, the kind of dwelling you live in or other building you use will determine what type of policy you will get. A dwelling policy will cover the actual structure of the house. This may also apply to a rented property such as an apartment. However, a structures policy may cover a structure such as a garage or shed that may or may not be connected to the house.
Personal Property
A dwelling policy will only cover the structure of the home. However, your personal property is not protected. Personal property includes items such as appliances, clothing and furniture. Still, personal property may not include other items such as firearms, jewelry and money. In either case, items such as these have to be specifically stipulated in a policy in order to make sure they are covered in homeowners insurance.
Loss of Use
In some cases, a home can actually be destroyed and not just vandalized or burglarized. A fire, natural disaster, flooding or some other incident like termite or mold damage can affect your home. When this occurs, it is no longer inhabitable. Loss of use coverage means that you will receive the funds you need for living expenses when you have to relocate. These expenses should be equivalent to your normal standard of living.
Open and Named Perils
It is not only important to decide what needs to be covered when you are building a homeowners insurance policy. You also need to consider what types of perils you need protection from. For instance, you may live in an area prone to flooding or an area that sees tornadoes every season. You can easily include these kinds of perils in your policy, but this may leave you unprepared for other kinds of perils.
With this in mind, you may need to consider whether you want an open perils policy or a named perils policy. With open perils coverage, you exclude only certain kinds of perils and are protected from a wider range of potential perils. Named perils coverage is more restrictive because they name which perils are covered. Most kinds of coverage for dwellings fall along the lines of open perils while contents in the home are likely to be covered under a named perils policy.
Replace Cost Coverage and Actual Cost Value
You will also need to consider other factors such as how much coverage you need to replace either the contents of your home or even the value of your home. Replacement cost coverage means that the cost of replacing the damaged home is covered, but there is no reduction for the depreciation of the property damage.
However, replacement cost coverage is not the tax assessed value and it is not the market value of the home. On the other hand, an actual cash value policy includes the cost to replace the damaged property, but it does include the reduction for the depreciation. In either case, your settlement is based on the actual cost value, repair cost or replacement cost. You have to decide what type of policy will help you best maximize the value of your losses.
Author Bio
Alex Wright is a blogger who writes informative articles in relation to the field of real estate. In this article he describes different forms of home insurance and aims to encourage further study with a real estate degree through Marylhurst University.
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Category: Home Insurance
