People living along the Hudson River who thought hearing about home owners insurance was about as boring as a listening to the fed chairman recite rap lyrics got a big surprise last year. Hurricane Sandy pointed out to many area residents just how important insurance is. Thousands discovered by example their lack of coverage, which had been sitting in plain sight in their policies. The words were there, written in very small type and translated into language only a lawyer could love.
Before the next Sandy, or any disaster hits next, it’s a good idea to learn what you should know about your homeowners insurance.
1. Know about exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These types of coverage must be bought separately. In areas which are so prone to flooding that flood plain maps include them in their designations, this kind of coverage can be very expensive. Unless you need it. Be careful what flood insurance covers. Force yourself to read the fine print and understand what it means. If you have questions, ask your agent. That’s why they get the big bucks.
2. Know about dollar limitations on claims. Even if you are covered for a risk, there may be a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately. If you have any big ticket items in the sock drawer, a valuable collection or something out of the usual that’s worth a lot of money, be sure your agent knows about it. He can tell you if you need extra coverage, just in case.
3. Know the replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $350,000 and it costs $380,000 to replace it, you’ll only receive $350,000. You will be hung with the rest of the burden funding the balance.
4. Know the actual cash value. If you chose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value.
5. Know the liability. Generally your homeowner’s insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.
Homeowners insurance may seem insignificant. After all, how often does a house burn down? How many Hurricane Sandy’s are in our future? No one can predict, but homeowners insurance can often help soften the disastrous affects misfortunes can have on homeowners.
Check our our Useful Links page for the names of local insurance companies our clients recommend.