Understanding Your Homeowner's Insurance - Five Things to Know

1. Look for things excluded from coverage. An example, typically an insurance policies don't cover natural disasters such as floods, earthquakes or even acts of terrorism damage - at least not as a standard policy item. These coverage's must be purchased separately.
2. Watch for $ limitations on any claims. You may be covered for a specific risk, but there might be a ceiling on the amount that insurer pays. An example, some policies may limit the dollar amount paid for jewelry that is stolen. You must insure these items separately.
3. You need to understand what the replacement cost is. If your home is completely destroyed you will receive a dollar amount to replace it only to your coverage maximum.So you want to be sure you have sufficient insurance!. This means that if your house is insured for $160,000 and it costs $190,000 for replacement, then you will only receive $160,000. You need to update your insurance coverage every couple of years !
4. Understand about actual cash value. If your house is destroyed and you decide you don't want to replace it, you will receive the cost to replace it , minus depreciation. This is what is known as actual cash value.
5. Understand about liability. In most cases your homeowners policy will cover you for any accidents when they happen to other people on your property. This includes such things as medical care, legal fees, and court awarded amounts. But , there is often an ceiling to the amount of insurance coverage provided. If your assets are significant , you may want an additional liability policy.