Your home is your greatest asset so homeowners insurance needs to be a top priority. If you were to experience a fire, flood, break-in, or natural disaster, you’d want to know that your insurance policy had you covered. Unfortunately, too many Americans are underinsured on their homes. To avoid this devastating scenario, be sure to ask your agent these four questions.
1. Will My Insurance Policy Rebuild My Home?
When you buy a home, your mortgage lender will require you purchase a certain amount of homeowners insurance. However, this amount is not always enough to rebuild. Be sure that your policy is enough to cover all of your rebuilding costs.
A good homeowners policy covers more than just the replacement costs associated with damage to the structure. It will also include extended replacement costs of 20 percent or more. This is crucial in the event of a natural disaster that causes widespread damage and pushes up the cost of materials and labor. You might also want to purchase a policy with inflation guard, which would automatically adjust your rebuilding costs when construction prices go up. And if you live in a flood zone, be sure to add on flood insurance. This is not included in the average homeowner’s policy.
2. Will My Insurance Replace My Possessions?
If your home is destroyed, you’ll not only need to replace the structure but the contents of your home as well. Most homeowners policies cover personal possessions at about 50 to 70 percent of the amount of insurance on the home structure. So if you insure your home structure for $200,000, that means you would have $100,000 to $140,000 worth of coverage for possessions.
Is that enough? The only way to know is to do an inventory. Do you own fine art? Antiques? Jewelry? If your possessions are worth more than what your insurance will cover, talk to your agent about purchasing additional coverage.
3. Will My Homeowners Insurance Cover Living Expenses?
If your home is destroyed in a disaster, you will need to live somewhere else while you rebuild. Most policies include at least some coverage for additional living expenses. The standard coverage is about 20 percent of the coverage on your home. But not every policy is the same. Some will allow a maximum amount of living expenses, while some will give you unlimited coverage for a limited amount of time. Just be sure that you know what your coverage is, and determine whether or not it is adequate.
4. Does My Insurance Cover Liability?
Liability provisions in homeowners insurance policies will cover you against lawsuits. If someone is injured by you or one of your family members, or if you cause damage to someone else’s property, they can sue you. Liability insurance will pay for your defense attorney and any damages awarded by the court.
If you have any concerns at all about your homeowner’s insurance coverage, contact one of our agents today. We’ll be happy to talk to you about your coverage needs.