10 Questions to ask about your homeowners insurance policy.

What does it cover?

Homeowner's insurance covers a specific array of damage to your property.  These could a fire in your home, a windstorm blowing the roof off, or burglars breaking in.  It also covers property damage, additional living expenses, personal liability, and medical payments.  But different policies have different levels of coverage, so ask to see if you’re covered.   For instance, your policy may cover you if someone breaks in to your car and steals something valuable. 

What doesn’t it cover?

Every policy has exclusions, so it’s important for you to ask your agent what is not covered.  Most policies don’t take care of you in case of natural disasters like earthquakes, landslides, sinkholes, and power failures, acts of war, nuclear accidents, government actions, and bad work by a contractor.  Tornadoes and hurricanes are usually covered unless you live in a particularly vulnerable area.

Ask if water damage is covered.

Water damage to your home is a completely different animal with most insurance policies, so specifically ask how well you’re protected.  Generally, water from below  - like from flooding or overflowing sewers or broken appliances – is not covered, while water damage from above – rainwater or burst pipes – is covered.

How much insurance do I need?

It’s important to have enough coverage in case the worst-case scenario comes to fruition.  That being said, your lender (if you have a mortgage) will decree how much minimum coverage you need.  But ask your agent if you should bump up that amount to cover personal affects and property.

What deductible is right for me?

Setting your deductible correctly is one of the biggest decisions you have when getting a policy.  Our first instinct is sometimes to go with the highest deductible to get the lowest possible policy cost.  But that may not be wise, especially if you consider that every year, about 6% of homeowners file a claim, and 97% of those claims are for some sort of property damage.  So set a deductible that you’re comfortable paying both monthly and if something happens and you file a claim.

Should you opt for Replacement Cost or Actual Cash Value?

When taking out a policy, you’ll have the option between these two methods of reimbursement if something happens.  Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation.  It’s recommended your insurance covers at least 80% of the Replacement Cost.  Actual Cash Value is the amount it would take to repair or replace damage to your home after depreciation. 

Policies based on market value usually have lower premiums, but you’ll get less back if something happens.

Are discounts available for preventive action and maintenance?

Ask your agent if there are things you can do that will bode well with your insurer and yield discounts.  Installing new smoke detectors, a fence around your pool, a new roof, or maintenance on your HVAC unit.  Something as simple as installing deadbolts could save you 5%, and a new alarm system might get you a 15% discount!

Can I save money if I bundle policies?

By filling your insurance needs for homeowners, auto, and other policies, you usually get a significant discount.  You should price the options for bundling versus separate policies.  A word of caution - life insurance or insurance as an investment is totally different than homeowners and auto, so don’t worry about bundling these just for discounts.

What about my jewelry?

Most homeowner insurance policies have specific exclusions or rules when it comes jewelry.  So if your wedding ring is lost or stolen, the fine print might only require them to cover up to $3,000 in value.  So ask about the limits for jewelry (and sometimes electronics or cash,) because there are supplemental policies you can easily put in place to make up the difference

How much time do I have to file a claim? 

You should read the fine print about time limits to file a claim if something happens.  Too often, homeowners are overwhelmed, stressed, and confused if something catastrophic like a fire or flood happens, and take way too long to file a claim with the insurer.  That puts them in jeopardy of their claim being rejected based on time limits.  Sometimes, the window is as small as 14 days.

What should I document?

If you file a claim, the onus to prove the existence and value of your property will be on you, so document everything carefully.  It’s recommended you make a list of personal property include serial numbers and model numbers.  Save receipts and take photos of everything, keeping it on a flash drive in a different location.  When you get home improvements or work done on the house, document everything including contracts and materials used.  If you have to file a claim, it’s recommended you create a log with phone calls and emails to your agent, the insurer or any contractors.