The Fundamentals Of Homeowners Insurance: Things You Need To Know Before You Buy
As insurance options go, homeowner's insurance (also referred to as fire insurance) is the one that more people seem perplexed by. Unfortunately, the inherent confusions lead people to make potentially costly mistakes when they buy their homeowner's insurance policy. If you're approaching your first home closing, you need to know how to get the most from your insurance purchase. Here's a look at some of the things that you need to understand.
You Need To Understand Your Coverage
Too many people buy homeowner's insurance without fully understanding what the policy covers and, more importantly, doesn't cover. It's essential that you understand the limits of your homeowner's policy so that you can address any potential risks that aren't yet protected.
For example, most homeowner's insurance policies won't cover damage caused by flooding of any kind, including broken pipes. You'll have to have flood insurance for that. In fact, if you buy a home in a flood plain, you'll be required to carry it. Flood insurance, underwritten by FEMA, is provided through most insurance carriers, but you have to ask for and pay for it separately.
In addition, your personal property coverage has its limitations. Make sure that you understand how much personal property coverage you have, what that extends to per item, and whether or not your more expensive items are directly covered or if they need an additional rider on the policy to ensure full coverage of those items. Things like expensive jewelry, artwork, and similar collectibles are often best insured separately just in case.
Your Dog Could Affect The Policy
When you get homeowner's insurance, you'll be asked about any pets. This is important because certain dog breeds are considered high-risk, and they can affect your policy. In some cases, your dog might result in a higher premium due to the increased risk. In other cases, you may have to shop around to find an insurance company that will cover you. Make sure that you understand each company's guidelines about dog breeds before you buy a policy.
There's A Difference Between Market Value And Replacement Value
When you choose the coverage for your home itself, you'll be asked if you want market value or replacement value coverage. It's important that you understand the difference between the two. The market value refers to what someone would pay for the house, and that doesn't mean it's equal to what it would cost to actually rebuild it. Replacement value, on the other hand, is equal to what it would cost to physically replace, or rebuild, the home. That's why most homeowners should opt for replacement value coverage, not fair market value.
Talk with a homeowner's insurance provider near you today for more information.
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