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Serving South Florida

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For over 35 years

Understanding Homeowners Insurance Policies

Homeowners’ insurance shouldn’t be taken lightly. If you get too much coverage, you’re throwing money away. However, with too little, you won’t be able to rebuild if disaster strikes. Homeowner insurance policies can vary greatly, and if homeowners aren’t careful, they may find their claims denied when disaster strikes, according to a study to be published early next year by the University of Chicago Law Review.

Knowing what your insurance policy covers — including fire, theft, and earthquakes — is important. Nevertheless, knowing the things that aren’t covered — known as exclusions — may be even more crucial. While home insurers once used standard policy forms by the Insurance Services Office, now some are coming up with their own policies and a few tweaks in the wording can mean trouble for some homeowners, according to the study. Homeowners should read the fine print and carefully review their policies to examine what’s covered and what’s not, the study notes. For example, some policies include mold and lead coverage; other policies do not.

Your homeowners’ insurance policy should probably cover the following items:

1. The structure of your house: Don’t base the cost of replacement of your home on what you paid for it, or on the value of the land. You’re not replacing the ground around you, and construction costs might be much different from what you paid.

2. Your personal possessions: Take an inventory of your home’s personal property, especially high-priced items such as jewelry, furniture, and electronic equipment. Determine how much it would cost to replace everything if you lost your goods to theft or destruction. If you think you need more than what the basic policies provide, talk to your agent.

3. Additional living expenses if you can’t live in your home: Additional living expenses are usually part of your standard policy and total about 20% of the cost of insuring your home. Policies that provide for unlimited expenses for a short period may also be available, as are policies for special situations, such as renting out your home.

4. Liability for injury to others: While most policies provide a base of $100,000 in insurance to cover your liability should you be sued, consider getting more: In today’s litigious society, potential damage awards could exceed those lower limits in a hurry.

5. Get special coverage if you need it: If you live in an area that floods frequently, you’ll want to make sure your coverage won’t leave you underwater in a flood. Similarly, residents in earthquake-prone areas have to weigh the added costs of earthquake insurance against the risks of being uninsured.

6. Consider umbrella insurance: Umbrella insurance isn’t directly connected to your home. However, if other types of insurance you have don’t provide enough coverage for damages, then your home could be at risk. Umbrella insurance provides additional coverage that makes sure injured parties won’t threaten to collect by taking away your home.

You should consider homeowners’ insurance to be an integral part of your overall financial plan. It can help minimize the disruption and economic loss you would realize should a calamity strike.