The first time you ever think about home insurance will be the first time you buy a home. While it’s a necessary step to get to the closing table, it’s something you want to understand before you select your policy. It might feel like buying homeowners insurance is just another “to do list” item, but there are things you need to know and understand so you don’t have any nasty surprises later.
WHAT PERILS YOUR HOME INSURANCE COVERS
A standard home insurance policy covers a number perils. These are things that, when they damage or destroy your home or property will be covered if you file a claim.
- Fire or lightning
- Weight of ice, snow and sleet
- Freezing of household systems
- Windstorms and hail
- Damage caused by vehicles
- Overflow or discharge of water
- Damage from artificially generated electrical current
- Sudden tearing, cracking or bulging of home
- Damage from aircraft
- and more
Some perils aren’t covered at all like nuclear hazards, wear and tear, or infestations. Other events, like flooding or earthquakes, require a separate insurance policy. Flood insurance is recommended for all homeowners regardless of whether you’re in a high-risk flood zone or not.
WHAT YOU CAN FILE A CLAIM FOR
Having insurance is one thing, but understanding exactly what you can file a claim for is another. These are the parts of your home and other issues you can file a claim for.
- The dwelling – your home and any attached structures – like the garage
- Standalone structures – fences, sheds, and carports
- Loss of use – living expenses when you can’t live in your home due to a covered claim
- Personal property – all of your belongings
- Liability – when you’re responsible for someone else’s injuries
- Medical payments – when a guest at your home is injured or you cause the injury of someone away from your home
There are two types of payments you need to understand about your insurance: How you’ll pay for your homeowner’s insurance, and how you’ll be paid if you file a claim. Not knowing how this works can lead to some big shocks later on.
HOW TO PAY YOUR INSURANCE PREMIUMS
If you have a mortgage for your home, as most people do, your insurance premiums can be paid through your lender. One part of the payment you make to the lender each month will be a portion of your annual premiums. It will be held in an escrow account on your behalf. When it’s time to renew your insurance policy, the funds will be distributed on your behalf. If the premiums are higher than expected, your monthly mortgage payment will increase to offset that increase for the next 12 months.
HOW MUCH MONEY YOU’LL BE PAID
When you purchase an insurance policy, you have a choice about how a claim will be calculated. You can choose the replacement cost option or the actual cash value option. Replacement costs mean that when something is damaged or destroyed, you’ll receive a dollar amount that allows you to replace the item. If you choose “actual cash value,” you’ll receive an amount of money that equals the value of the item. The vast majority of things, like electronics and other goods, decrease in value over time. With this option, you’ll receive less than the amount to replace what was lost.
You might want to get your homeowner’s insurance purchase done and out of the way. But make sure you know exactly what you’re choosing and what’s in your policy. The time to find out exactly what’s covered isn’t the day you call to file a claim.
Here at Charlotte Insurance we’re happy to help new and existing homeowners find the best coverage for their home. Give us a call, and we can explain your current policy coverage or help you find something better suited to your needs.