Knowing what your insurance covers is essential for homeowners. After all, if you understand what’s covered and what’s not, you can make sure you have adequate protection. You can identify the add-ons that fit your unique situation. Plus, you’re less likely to file claims that get denied.
However, a Realtor.com study recently revealed that 15 percent of homeowners not only had no idea what their insurance covers, but they also weren’t even sure what to check. Another 29 percent thought they knew what their policies covered, but learned most of that while shopping for coverage.
5 details to check in your home insurance policy
Home insurance doesn’t have to be hard – we promise! And to prove it, we’ve laid out some of the key details just as one of our representatives would if you called them on the phone. That means we use the easy-to-digest language to explain your policies:
- Coverage.
- Deductibles.
- Exclusions.
Customers who know more about home insurance ask better questions and provide more accurate information when they apply for coverage. By the time you get to the end of this post, we want you to have a solid handle on what homeowners insurance covers so you can buy the right policy for you.
1. Coverage
One of the things that confuse people about homeowners insurance is that it’s a single policy, but it’s typically split into six coverage parts or sections. Each coverage kicks in for a different type of financial loss. The six basic coverages are:
- Dwelling coverage insures your home’s physical structure and pays to repair or replace it if it’s damaged by a covered peril.
- Other structures coverage pays for damage to structures that are on your property but aren’t attached to your home, like sheds and gazebos.
- Personal property coverage covers your belongings like appliances, electronics, and clothing.
- Loss of use coverage pays for your additional living expenses if your home is made uninhabitable by a covered peril.
- Personal liability coverage helps with your legal costs if you're sued for someone’s injuries or property damages.
- Medical payment coverage pays your guests’ immediate medical costs if they're hurt on your property.
2. Coverage limits
The six coverages in homeowners insurance usually have separate limits or the maximum amount your insurance company pays in a covered claim. Coverage limits can be a percentage of the limit you have on your dwelling coverage. This is typically true for the coverage limits on your:
- Other structures.
- Personal property.
- Loss of use coverage.
Your coverages may also have sublimits. A sub-limit is the maximum amount your insurance company pays in a particular type of claim. High-value personal property, like fine art or jewelry, often has a sublimit. So you could have $50,000 of personal property coverage, but your insurance company might limit what it pays for jewelry to just $1,500. That may not be enough to pay for damage to something really valuable, like an engagement ring.
Moreover, sublimits are usually still part of your coverage limit. This $1,500 jewelry claim also reduces the amount of coverage you have for any other personal property claims you make during your policy term.
3. Deductibles
A deductible is what you pay for a claim before your insurance policy kicks in. For example, let’s say a fire causes $10,000 worth of damage to your dwelling. Your dwelling coverage limit of $250,000 can easily cover that, but your policy also requires you to pay a $500 deductible. You cover that $500 first, and then your insurance carrier pays the remaining $9,500.
Homeowner's insurance policies can also have more than one deductible, particularly in areas with unique weather risks. Florida is a good example of this because most Florida homeowners insurance policies have both a standard deductible and a hurricane deductible. Louisiana homeowners insurance, however, often has both of those and a wind/hail deductible.
Opting for a higher deductible can help you keep premiums down. However, you don’t want to be stuck paying huge out-of-pocket expenses in a claim, so be sure to choose a deductible you can afford.
4. Exclusions
Your homeowners' policy also has perils that it doesn’t cover. These are called exclusions, and home insurance usually handles them in one of two ways:
- Open perils coverage. Sometimes described as an “all-risk policy,” an open perils policy covers events unless they are specifically mentioned as excluded in the policy language. Common exclusions include flooding and earth movement.
- Named perils coverage. This type of home insurance only covers perils that are listed in the policy language. There are usually about 16 perils that are named, and therefore covered, by this policy. Anything else is considered an exclusion.
Before you commit to an insurance policy, you want to know which type of coverage you're getting. Our policies insure your dwelling on an open-perils basis, which many people prefer because it covers so many more risks. Your personal property, however, is usually covered on a named-risk basis.
5. Endorsements
Insurance endorsements are key to making sure your homeowners' insurance covers what you need it to because they let you add or change coverage. For example, we offer endorsements that cover:
This checklist should be enough to help you find home insurance that fits your situation. But If you still have questions, don’t be afraid to talk to your insurance representative. We want you to understand what your homeowners' insurance covers so you get the right protection.
