FIVE QUESTIONS TO ASK WHEN CHOOSING A HOMEOWNERS’ INSURANCE POLICY

Now that you’ve moved into your dream home, be sure to protect this immense investment with a solid homeowners’ insurance policy. Legal language can be confusing, however it is important to understand exactly what is covered and what is not.

While most policies cover damage from fire, lightning, windstorms, hail, explosions, smoke, vandalism, and certain types of theft, it is important to consider additional aspects of the policy. For example, if your home sustains substantial damage, are you covered for living expenses such as hotel residence while repairs are made?

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Here are five frequently asked questions to help determine the coverage you need.

What type of coverage does a typical homeowners’ policy include?
Six types of coverage are included in a typical policy. ‘Dwelling’ pays for damage to the home and attached structures such as your garage. ‘Other structures’ pays for damage to structures not attached to the home such as a freestanding garage. ‘Personal possessions’ compensates for your stolen or lost goods even when they are away from home, however many homeowners buy specific riders for expensive jewelry such as your engagement ring. ‘Loss of use’ covers some living expenses in the event that your home is uninhabitable during repairs. ‘Personal liability’ offers financial protection in the case that you are sued and ultimately responsible for injuries or damages endured by someone else. Lastly, ‘medical payments’ covers medical bills should anyone be injured on your property.

How much insurance do I need to cover the structure of my home?
The amount of dwelling coverage you purchase should equal the full replacement cost of your new home. In the event of a total loss, you would have to rebuild your entire home in its current location with similar construction materials—you must insure for that amount. If you built your home, be sure to add any additional investments you have made such as a new deck and/or a finished basement.

How can I ensure my personal possessions are protected?
The rule of thumb when determining how much coverage to purchase for your personal possessions is to insure them for 50% to 75% of your total dwelling coverage amount.

Do I need liability coverage?
Sometimes, the unimaginable can happen. Your dog may bite a solicitor or someone may fall on your front porch. In this type of event, you may be liable to pay for those injuries unless you have ample liability coverage. According to the Insurance Information Institute, the average amount of liability coverage included in a homeowners’ insurance policy will range from $100,000 to $300,000. High-net-worth homeowners should consider purchasing an umbrella liability policy which offers liability protection for their assets.

What else should I consider?
A standard homeowners’ policy does not cover flood damage, so you must buy separate protection if you live in a flood zone. Also consider the deductible which is the amount you will pay for every claim submitted. As with most insurance products, the higher your deductible, the lower your insurance premium will be.

Article by: Jennifer Elkow