You probably purchased the right amount of coverage when your policy was first issued. However, property values rise. Your coverage on your home from 10 years ago won’t be sufficient today. Real estate is subject to change, so it’s a good idea to check your homeowners insurance coverage every year to make sure you are adequately covered. What should you be looking for?
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Property Damage and Loss
You should know that homeowners insurance covers the costs (minus any deductibles) to rebuild, replace or repair your home and exterior structures. If hailstorms cause damage to your roof, homeowners insurance will cover the cost of replacing or repairing it. In the same way, homeowners insurance can help you rebuild your home, detached garage, or shed if it is damaged by fire.
You will still need somewhere to live while your home is being rebuilt or repaired in the event of such a catastrophe. Your homeowners insurance will pay for alternative living arrangements. If your home is broken into, homeowners insurance will cover you. You can get replacement for any stolen valuables through your homeowners policy.
It is important to review your policy and identify any gaps in your coverage. This is especially important in today’s market. Due to recent real estate price rises, it is possible that your homeowners policy doesn’t cover an increase in the property replacement value.
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Personal Liability
You, the homeowner, are responsible for all activities on your property. You could be held responsible if someone trips and falls on your porch steps causing injury. You have homeowners insurance that provides liability coverage in the event of such an unfortunate circumstance. Your homeowners policy covers their legal and medical expenses. You should know exactly what expenses your policy covers. The expenses can quickly add up if a neighbor injures their ankle in a bizarre way and needs multiple surgeries. You’re not only looking at medical expenses in such cases. You will likely be confronted with legal expenses in a lawsuit that seeks to replace lost wages.
These fees can quickly spiral out of control. You need to know how much your policy will cover you in such an instance. Your proactive review can help you determine where you should add personal liability coverage.
Exclusions
Several exclusions will be revealed as you go through your homeowners insurance review. These are events or catastrophes that your policy does not cover. Your policy might cover damage to property from hurricanes but not flood damage. This could cause problems as flooding is a common occurrence in hurricanes.
Your home may survive the hurricane, but it could also be severely damaged by the flooding. Floodwaters entered your home and destroyed your floors, walls, and belongings. Your homeowners policy won’t cover the costs of cleaning up, replacing, repair, and rebuilding your home because the floods caused the damage.
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This is where the problem lies. Unfortunately, homeowners often assume that they are covered because flooding was caused hurricane-related. They fail to add this coverage to their policy, and they are left devastated when disaster strikes. You should carefully review your policy and pay attention to what is written. It could make the difference between a setback or total devastation.
Many homeowners policies do not cover damage to property from sinkholes and vandalism. Check your policy to find out what kinds of disaster damage it covers. You might need additional coverage. It’s okay to have additional coverage. There are many options. You can review your coverage to ensure that you address any exclusions before it is too late.
Additional Riders
Clients with unique or costly collections and properties have also had problems with their homeowners insurance policies. Standard homeowners insurance will replace basic personal property that is less than a few thousand dollars. But I’m sure there are many other people who have property worth more than that. My wife’s engagement and wedding rings are more valuable than the standard coverage. Some firearms, coin and fine art collections as well as antiques can be worth more than what the standard coverage will pay.
Umbrella Insurance – Do I Need It?
If you own personal property that is worth more than $2,000, you will need to add a rider (or “scheduled coverage”) to your policy. Scheduled coverages are often cheaper than regular policies, but they don’t usually have a deductible.
What amount of homeowner’s insurance coverage do you need?
This brings us to the critical question: How much insurance do you really need? An annual review of your homeowners insurance policy is the only way to get an exact answer. Consider the possibility that your home’s value has changed since the time you bought your homeowners insurance. It’s possible to pay more for insurance than you actually need. Consider the value of your assets, including your home and personal belongings, when determining the amount of insurance you need.
How much coverage do your needs really require?
- You can replace your structure with enough
You must cover the structure of your home. This is not based on the original value of your house at the time you bought it. Instead, you should be looking at the replacement value of your home.
Let’s say you bought your home in 2008 for $200,000 when the housing market was struggling. The housing market is expected to boom in 2021. Your home could be worth $400,000 to $600,000. To replace your home, you will need to pay between $400,000 to $600,000. If your policy covers only $200,000 of the home’s original value, then it will not cover 33%-50% the current replacement value. This would be a problem for most homeowners.
- You Can Replace Your Belongings With Enough
You will need to replace everything in your home. This covers everything in your home. This includes everything inside your home, including clothes, towels, silverware, televisions, furnishings and books (this would be an enormous line item in my house). It is vital to have sufficient coverage in order to replace all items in your home.
Most homeowners policies will cover personal property up until 50% or 75% of the value of the home. If you own a $100,000 home your policy may only cover $50,000 to replace any items that have been damaged.
Did you ever try to calculate the replacement cost for all your belongings? It may surprise you to see how quickly your personal belongings limits are exhausted. Clients are often advised to take inventory of all their belongings and keep them archived. It’s easy to do. Simply take your smartphone and go through each room. You can capture every item on the camera. Describe everything that you see by opening every drawer, cabinet, and door. After you have done this, you will be able to get a homeowners insurance that will cover the cost of replacing what you own.
- You Have Enough Protection to Protect Your Assets
You must ensure that you have sufficient liability coverage to cover any legal and medical expenses that may arise from accidents at your home. You don’t want any debt. If your policy covers $100,000 to $300,000.00 in liability coverage, you might consider purchasing $300,000 to $500,000 protection. These costs add up quickly and can become out of control. It is better to spend a little more on insurance than to end up paying the majority of someone’s legal and medical bills.
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You may also need to add a rider on your homeowners policy if your business is located in your home. This will cover you in the event of an accident while your employees are at your house for business purposes.
