If you own a home, you have homeowner’s insurance. But how much do you really know about this essential coverage you hope you never need?
The fact is that insurance agents frequently deal with people who are dismayed to learn that they don’t have adequate protection only after a tragedy occurs. Take a look.
1 – Not all natural disasters are covered
If you have insurance, you naturally assume that you have coverage for damages resulting from natural disasters. That’s only partially true.
While your policy does generally protect against losses from lightning strikes, ice damage, or forest fires, you don’t always automatically have insurance for every natural disaster. If you’re in an area prone to events like earthquakes or floods, check out additional coverages to ensure protection.
2 – You should reassess your coverage every year
Once you purchase a home, you’re likely to begin adding features, renovating, or buying new goodies to fill it. The amount of coverage that you need at closing—when your home is bare bones—looks very different from your needs after you’ve moved in and begun making your home your own.
Call your insurance agent before your annual renewal and let him or her know of any significant changes you’ve made or contents you’ve purchased—especially those with a higher ticket price.
3 – A home’s location impacts its value…and your premiums
If you live in a prime urban or suburban location; typically, your premium will run higher than a similar home in a rural location. Replacing a home in a city often costs more in terms of physical materials, laborer wages, and construction costs in prime markets.
4 – Don’t use amount of coverage required by your mortgage lender
Many homeowners believe that the amount of insurance coverage dictated by the mortgage lender is accurate. Don’t fall into that trap. The total insurable value of your home is not related to the amount of money you borrowed.
The truth is your mortgage lender cares only that you cover the amount left on your note. So, the mortgagee’s requirement may be less than or, in some cases, MORE than your home’s insurable replacement cost. And if the bank tries to require you to carry higher limits than the home’s insurable value, they may be violating state law. Ignore the bank, talk with your agent about the method for developing the insurance value of your home.
5 – You can have claims denied if you don’t perform routine maintenance
While your homeowner’s insurance covers most damage, any losses that result from neglecting repairs or maintenance to your property can cause a claim denial.
Here’s an example. Homeowners knew for years that overgrown shrubbery was scraping against the siding on their home. They never took the time out of their weekend to trim up the shrubs. Eventually, the shrub wore a hole through the siding and moisture began collecting and caused rot.
Because this claim results from ongoing neglect of an obvious problem, this claim for roof repair and water damage cleanup could be denied.
6 – Homeowners in different regions or states have very different needs
If you’ve moved to your home from another location, you might be aware of varying homeowner’s insurance needs.
For example, claims due to wind damage might be covered in your home state in the north or midwest; however, if you move to a warm beachfront location in South Carolina, this coverage could require a separate policy.
If you’ve recently relocated to a new region, seek advice from a local insurance agent about any loopholes, so you don’t get caught by surprise.
7 – It can cost more to insure an old home, even in a non-prime location
Because older homes come with an often unpredictable amount of concerns, premiums can be as much as 20 percent higher than newer homes. This fact is even true in non-prime locations.
Insurance providers shudder at the claims that can stem from old electrical work, possible plumbing malfunctions, and old wells on the property. Your insurance agent can tell you how to take steps to mitigate some of these risks.
When it’s time to obtain homeowner’s insurance, work with a local agent. They can advise you of all the pitfalls that are specific to your neighborhood. And, if you have had the same homeowner’s policy—and the same coverage--for several years, reach out to your agent for a check-up of your coverage.