5 Things to Understand About Homeowners
Insurance
1. Look for exclusions to coverage. For example,
most insurance policies do not cover flood or
earthquake damage as a standard item. These
coverages must be bought separately.
2. Look for dollar limitations on claims. Even
if you are covered for a risk, there may a limit
on how much the insurer will pay. For example,
many policies limit the amount paid for stolen
jewelry unless items are insured separately.
3. Understand replacement cost. If your home
is destroyed you’ll receive money to replace
it only to the maximum of your coverage, so
be sure your insurance is sufficient. This means
that if your home is insured for $150,000 and
it costs $180,000 to replace it, you’ll
only receive $150,000.
4. Understand actual cash value. If you choose
not to replace your home when it’s destroyed,
you’ll receive replacement cost, less
depreciation. This is called actual cash value.
5. Understand liability. Generally your homeowners
insurance covers you for accidents that happen
to other people on your property, including
medical care, court costs, and awards by the
court. However, there is usually an upper limit
to the amount of coverage provided. Be sure
that it’s sufficient if you have significant
assets.
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