Insurance Basics: Homeowners Insurance
Your home is one of the largest, if not the largest, assets you own. And if you own a home and have a mortgage, homeowner’s insurance is almost always required. Lenders require homeowner’s insurance to protect their investment in your home in case damage occurs. Even if you have a mortgage, homeowner’s insurance is something every homeowner should have to protect their assets and livelihood. Should the unthinkable happen, your homeowner’s insurance is designed to help you recover, repair, and rebuild.
When was the last time you reviewed your policy? It’s important to understand the ins and outs of your coverage to ensure that you have the right amount and coverage amounts you’re comfortable with. In this article, we’ll break down a policy and what each coverage means.1
Overview of Homeowners Insurance
Homeowners insurance covers quite a bit more than just the physical structure. While the home’s physical structure may include attached structures, fixtures, and built-in appliances, many don’t realize that your insurance also provides personal liability coverage for injuries or damage that occur from covered accidents. Many homeowners add additional coverage, including unattached structures, personal property, medical payments, additional living expenses, sewer backup, and umbrella liability.1
Understanding Your Policy Coverages
Your homeowners policy will depend on the type of dwelling you have. Most single-family homeowner policies involve the following types of coverage:
- Dwelling: Pays for damage to the house and attached structures.
- Other Structures: Pays for damaged structures not attached to the house (fences, sheds). Coverage is typically a percentage of the total dwelling value.
- Personal Property: Pays the value of damaged or lost possessions (furniture, electronics, clothing). Coverage is typically a percentage of the total dwelling value.
- Loss of Use: Pays some additional living expenses during home repair. Coverage is typically a percentage of the total dwelling value.
- Personal Liability: Covers financial losses from property damage and personal injuries to others if found legally responsible. You can choose the amount of personal liability coverage you’d like to add.
- Medical Payments: Pays medical bills for people hurt on the homeowner’s property or by the homeowner’s pets. You can choose the amount of medical payment coverage you’d like to add.
- Water Backup of Sewer: Pays for losses to the house from sewer or drain backup. Coverage is typically a percentage of the total dwelling value.
- Personal Umbrella Liability: Pays for losses from bodily injury, property damage and personal injury to others beyond the policy limits. Coverage is typically a percentage of the total dwelling value.
- Flood Insurance: Separate policy that pays for flood-related damages to the house and contents.
- Earthquake Insurance: An add-on or separate policy that pays for damages to the house and other covered items caused by an earthquake.1
A Caveat: What Isn’t Covered
In the section above, you may have noticed that flood and earthquake insurance are not commonly included in your homeowners policy. Damage resulting from earthquakes or floods is not covered by your standard insurance and requires separate policies. Even if you’re not in an area prone to floods or earthquakes, it may make sense for you to add these policies, just in case.1
How Much Coverage Do You Need?
When it comes to insuring your dwelling, you should have enough insurance to fully rebuild should your home be destroyed or become unlivable. You can insure your home based on replacement costs (the cost to rebuild) or actual cash value (ACV). ACV is based on the current market value. It may make sense to review these options with an agent to determine which one is the best choice. Should you need to use your insurance, you’ll need to pay your deductible first before the insurance pays any claims. Depending on the type of damage involved, an insurance or claims adjustor may need to inspect the property as well.1
It’s also important to note that when you set your deductible, consider which is easier to pay. The lower the deductible amount, the higher the policy cost will be.1
It’s important to read your homeowner’s policy carefully to ensure your home and family are protected. Make sure you know the specific types of damage your homeowners policy will cover. Some policies, for example, might exclude damage from windstorms and hail if you live in a hurricane-prone area. Check the details to determine what, if any, exclusions may apply.1
Review and Update Your Policy
When was the last time you reviewed your homeowners policy? Insurance policies should be reviewed annually to determine if your coverage still makes sense. Home values can change, and if you’ve made major purchases or upgraded appliances, your home coverage needs to reflect that. It’s also important to inventory your personal belongings annually to ensure that you have the proper content coverage. Something as simple as purchasing a new TV or as complex as inheriting family heirlooms changes the replacement cost of your valuables, and many homeowners neglect this important step.
102 WEST HIGH STREET, SUITE 200
GLASSBORO, NJ 08028
WARRANTIES & DISCLAIMERS
HFM Investment Advisors, LLC (HFM) is a registered investment adviser located in Glassboro, NJ. HFM’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of HFM’s website on the Internet should not be construed by any consumer and/or prospective client as HFM’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice, over the Internet. A copy of HFM’s current written disclosure statement discussing HFM’s business operations, services, and fees is available at the SEC’s investment adviser public disclosure website – www.adviserinfo.sec.gov or from HFM upon written request. HFM does not make any express or implied representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by HFM or any unaffiliated third party, whether linked to HFM’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
This website and information are provided for educational and information purposes only. All investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, legal, or other professional advice.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.