Insurance policies offer multiple plans that provide different levels of protection against liabilities and risks. But do you know what your insurance policy covers? It’s stated that 15% of homeowners don’t know what their policy covers and they don’t know where to check.
Therefore, it’s essential to have extensive knowledge of the appropriate add-ons, exclusions, limits, and so forth. The last thing you want is to file a claim and find out you weren’t as protected as you thought you were. Here’s what you need to know.
Do You Know What Your Home Insurance Policy Covers?
The primary objective of a home insurance policy is to provide financial support to the insured in the wake of an unforeseen incident. However, it doesn’t help much if you’re unsure what’s excluded or don’t know what your coverage limits are. You never know, your home could be underinsured and you may not even know it.
In this article, we’ll explain the key sections of a home insurance policy. Let’s begin.
1. Home Insurance Coverage
Homeowners’ insurance may seem like a single policy but in truth, it’s separated into six parts. A different coverage will kick in depending on the type of loss that takes place.
There are certain perils every home insurance policy typically covers. Take a look at what they are below:
- Coverage for other structures, such as gazebos, barns, or sheds. They’re a part of your property but not technically attached to your home.
- Dwelling coverage protects your home’s physical structure from damages due to various perils.
- Provides medical coverage for guests who sustain injuries on your property.
- Covers legal costs you may incur if another person sues you for property damages or injuries.
- Coverage for loss of use protects you in times when your home is uninhabitable due to a covered peril.
This is the amount you agree to pay during the claims process before your insurance policy kicks in to cover the rest. It’s common to have more than one deductible on your home insurance policy. This is especially the case when you live in high-risk areas such as Florida and Louisiana.
Opting for a higher deductible can save you money in the long run; however, make sure you choose a deductible you can afford.
3. Coverage Limits
The six coverages in your policy will usually have their own coverage limits. This means once the limit is reached, you’re insurance won’t cover the rest. So, any remaining expenses that need to be covered will fall on you.
You will typically have separate coverage limits for the following coverages:
- Loss of use
- Personal property
- Other structures
Moreover, it’s also common for coverages to have a sublimit, which is the maximum amount you can receive from your insurer. For example, your limit on your personal property may be $50,000 but your insurer says they’ll only cover up to $1,500 in jewelry. If this is the case, you may need to add on additional coverage for valuable items.
Endorsements play an essential role in a homeowners’ insurance policy. What they do is allow you to exclude, remove, add, or limit your coverage. Many people use this to add on additional coverage for their home and/or personal belongings.
For instance, some endorsements include:
- Sump overflow and water backup
- Home business
- Identify theft
- Golf carts
- Animal liability
Your policy will include one of the following:
- Named perils coverage – this is a policy that only covers the listed perils. So, if something isn’t listed then its considered an exclusion.
- Open perils – this policy will cover an event unless the language specifically mentions otherwise. For example, an earthquake or flood would be common exclusions.