Understanding your homeowners’ insurance policy can help ease any worries you might have regarding your policy and how it can handle property damage. With the changes in weather patterns in recent years, it’s normal to be concerned about how your policy can assist you in the case of natural disasters. You should review your needs with an insurance professional to get the best possible coverage.
Here’s a general guide to help prepare you for customizing your homeowners’ insurance plan.
What Does a Homeowners Policy Provide?
The main scenarios that are covered by homeowners insurance involve damage to the interior and exterior of your property caused by criminals or certain natural disasters. The coverage also includes personal liability when harm is caused to others, such as if someone is harmed while on your property. In case the injured person sues you because they believe your property is at fault, your policy will cover such litigation costs.
Additionally, most of your personal belongings inside your home should be covered up to certain limits. Jewelry is an example of possession that might only be covered for part of its value. It’s best to make an inventory list of your possessions and share it with your insurer to document your ownership and to assess the amount of coverage you need.
So, if a fire destroys your home, you will be compensated by the insurance company for damaged items based on the coverage limits set for the policy. According to the Insurance Information Institute, most insurers cover 50 to 70% of home structure replacement value.
Another advantage of a standard homeowners policy is that it will pay for lodging while repair work is done on your home. Not only will it pay for a hotel or rental space, but it will also cover living expenses, including restaurant meals. The policy will have daily spending limits, but at least you’ll have a roof over your head until your home is repaired.
What Are Different Types of Homeowners Plans?
The insurance industry has developed standards for different types of homeowners insurance plans. The three levels of homeowners insurance coverage are actual cash value, replacement cost for damaged items, and extended replacement cost/value.
Actual cash value is based on the cost of the home plus the value of its contents minus depreciation.
Replacement cost combines actual cash value with home possessions without subtracting the depreciation value. Extended replacement cost/value offers a more flexible plan that provides more coverage than what you paid, as it covers whatever it takes to rebuild your home. This plan, also known as Guaranteed Replacement Value, provides the best value compared to other plans.
The National Association of Insurance Commissioners (NAIC) has reported that most home policies comprise at least six sections of coverages. These include:
- Physical damage to the home
- Physical damage to other structures
- Personal property damage
- Additional living expenses
- Comprehensive personal liability
- Medical treatment costs
Your policy will list the specific causes of damage that can be covered, such as explosions, falling objects from trees, smoke, theft, and vandalism. Reviewing your policy with an insurer can help you identify coverage gaps and how to fill them.
What Isn’t Covered by Homeowners Insurance?
Even though a standard homeowners policy covers a wide range of disasters, it doesn’t cover everything. Flooding and earthquakes, for example, usually require separate coverage. Regions that experience the most regular flooding are prone to higher rates on flood insurance than in areas where flooding is less frequent. At the same time, climate change is causing all kinds of unexpected disasters, so flooding could potentially happen in areas without historical precedent.
Severe storms can cause damage that a standard policy may not cover, such as sewage backup. You can add this coverage to your plan and set limits based on risk. Any type of insurance available can be added to your overall coverage, which results in a customized plan. Certain scenarios, though, aren’t backed by any type of insurance coverage, such as disasters involving the homeowners’ neglect. If evidence shows you accidentally started a fire by knocking over a candle, the insurance agency won’t cover the damage.
How Are Homeowners Insurance Rates Determined?
The methodology for determining homeowners insurance rates is unique for each insurer, although they all broadly base rates on risk assessment. It comes down to the individual, the property, its location, and the odds of filing claims for certain issues. Homes in a high crime area, for example, have higher risks than homes in safer neighborhoods, so any homeowner living in a high crime area will pay higher insurance rates.
Since each insurance company uses its own criteria for establishing monthly premiums, make sure to get multiple quotes from different companies before deciding on your insurer. Find out which companies offer special discounts for coverage that’s relevant to your needs. Talking to an insurance agent helps because it allows you to ask questions about coverage areas you’re not clear about.
The comprehensive nature of insurance policies invites asking a long list of questions about specific coverage and rates. It’s important to have a clear understanding of how mortgage and insurance work together, as certain mortgage agreements require specific types of insurance coverage.
What Are Some Cost-cutting Insurance Tips?
The following are a few tips that you can follow to reduce your insurance costs.
- Avoid moving to a neighborhood known for high risks
- Conduct routine insurance rate comparisons
- Ask your insurer about discounts for multiple policies
- Raise your deductible so as to lower annual premiums
- Lower your risks by investing in a security system
- Move close to a fire station or fire hydrant to lower risk and rates
Choosing the right homeowners insurance in Portland, OR will give you peace of mind, knowing that you, your family, and your belongings are well-covered by a policy in case the unexpected happens. Contact our experts at Action Insurance Group to learn more about how to protect your assets with adequate insurance coverage.
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