Homeowner’s insurance provides protection for most of the things you own, including your house, other buildings on the property, and all the stuff inside. This coverage is important protection for your investment. Careful planning and research should be undertaken when making a purchase for a homeowner’s insurance product.
One of the important components of a homeowner’s insurance policy is the section that deals with your property. This section has four basic parts. Coverage A protects your home, Coverage B protects other buildings that may be on your property, Coverage C protects your contents, or personal property, and Coverage D provides benefits to you for the loss of use of your home in the event of a large loss. For example, if your home is damaged by fire, and takes several months to rebuild, this section will help to pay your hotel or extra expenses.
Each of the coverages outlined above has a limit that applies. Coverage A is based on the value of your home and can be determined on a Replacement Cost basis, or Actual Cash Value, which is defined as replacement cost less depreciation. The other limits are most often calculated as a percentage of Coverage A, so it is important to review your policy to ensure that the specified percentage will be adequate. For example if you have valuables that far exceed the value of your home, your homeowner’s insurance policy may be inadequate.
You should ask your agent about any special limits that apply. A homeowner’s insurance policy will have special limits that apply to things like cash and jewelry. These can be increased by endorsement, but you have to ask and you have to specify the amount of coverage that you want.
Coverage for your building can be narrow or broad depending on how much you can afford. Narrow coverage forms will offer protection only for a list of “named perils”. You can buy a policy with only a few perils, or as many as 17. The alternative to a named peril policy is called a “special form”. This covers any loss that is not specifically excluded. This provides the broadest coverage.
You may find that your mortgage company requires an amount for Coverage A, and may require the type of form you have. They require this so they are also protected in the event of a loss, as they have a significant financial interest in the your property.
Learning as much as you can about insurance protection for your home and personal property is very important in ensuring that you are obtaining the best value for your insurance dollar. Be sure to carefully review all of the details of your policy with your agent. When shopping for a policy, compare the cost as well as the policy features as the lowest price sometimes only means you are getting narrower coverage.