Top 10 Questions To Ask About Your Home Insurance Policy
In essence, homeowners insurance is the type of property insurance that covers damages and losses to your residence along with the furnishings and other assets found at home. Homeowners insurance also provides liability protection against accidents that occur in your home or on your property.
A typical home insurance policy covers four kinds of incidents on your insured property: exterior damage, interior damage, personal belongings/assets, and any injury that occurs while on your property. When you make a claim on any of the incidents mentioned, you will be required to pay a deductible.
Basically, the higher the deductible on your insurance contract, the lower the annual or monthly premium will be. While home insurance policies seem straightforward, there is more to it than meets the eye.
That said, if it is your first time to purchase a home insurance policy, you must have a clear understanding of how it works and how you can maximize all the benefits it offers to the fullest. Get your search for the right insurance policy off to a great start by asking your insurance agent the following key questions:
1. What are some of the factors that can affect the cost of home insurance?
Your home's susceptibility to damage, it's location, and the amount it is insured for are just some of the factors that can impact your home insurance. For instance, if your home is in an area that's near bodies of water and it's made of substandard materials, your home insurance cost will be higher.
2. What is ACV or actual cash value?
Actual cash value or ACV is a policy that uses a property's life expectancy, age, and condition to determine it's worth and how much they'll pay you. Since ACV is less expensive, it won't pay for the complete repair and rebuilding of your home. Actual cash value also protects your personal belongings like clothing, furniture, and appliances.
3. Is there a way that I can minimize my home insurance cost?
If you want to reduce your home insurance cost, start by comparing quotes from various providers. It is also recommended that you take note of the coverage they offer to help you decide which one is best for you.
Raising the deductible can also reduce the premium significantly, so this is another option you should also look into. It would also be best to speak with your insurance agents about the discounts they offer.
4. What does a home insurance cover?
Home insurance policies can differ in a lot of ways. However, most offer four customary coverage: loss of use, liability, personal property, and dwelling.
5. What is dwelling coverage?
Dwelling coverage protects the structure of the home if any part is destroyed by specific events or perils. Any structure attached to your home like roofing, walls, foundation, garage, and flooring is covered. And yes, even built-in appliances are included.
6. What is personal property coverage?
Personal property coverage covers items or personal belongings found inside the home. The policy also protects jewelry, furniture, clothing, and electronics. To determine the coverage you need, it would be best to create a detailed inventory of your personal belongings and provide a copy to your insurance agent.
7. What is liability coverage?
Liability coverage protects you when you or a household member (or your dog) injures a person while on your property. It also provides protection when you or someone from your family causes unintentional damage to the property of others.
Liability coverage provided can vary and will depend on the policy limit. Some homeowners, however, consider getting liability insurance a must, especially if they own pets.
8. What is the typical rate of homeowners insurance?
Homeowners insurance rates can differ vastly depending on certain factors like state or location. As of 2020, the average cost of homeowners insurance is estimated at more than $1,400 per annum. Top five states with the most expensive home insurance include Kansas, Texas, South Dakota, Oklahoma, and South Carolina.
9. What is loss of use coverage?
Loss of use coverage protects a damaged house that has become temporarily uninhabitable after being hit by a fire or a covered peril. Otherwise known as additional living expenses or ALE, this coverage is for the extra cost you incur when you are not residing at home.
Other expenses covered by loss of use protection include regular grocery expenses, additional food expenses, and even pet boarding. As a general rule of thumb, speak with your agent to find out what the inclusions are.
10. What is replacement cost value or RCV?
Replacement cost value or RCV is a policy that pays the cost required to rebuild or restore damaged property. RCV replaces the damaged item with a new one and does not deduct depreciation. Replacement cost value is more expensive than ACV since it has more comprehensive coverage.
Not all homeowners insurance has been created equal. To ensure you find the home insurance policy that will best suit your needs, talk to your insurance agent so you will be guided accordingly.
About the Author
Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.