Of all the insurance plans you carry, you’re likely less familiar with the terms of your home insurance than all others. You selected your life insurance plan very carefully to meet criteria, likewise your health insurance is something you deal with on a fairly regular basis. But unless you have a need to call upon it, your home insurance is something you pay for each year, only to be surprised with what amount of coverage you have when disaster does strike.
In Case of Emergencies
Your home is your largest investment for most families and protecting that home is two-fold. You do all you can to protect your investment by locking your doors, planning ahead and buying in a safe area. And you buy homeowner’s insurance to cover just about anything else that can possibly happen.
But as many have found out thanks to hurricanes, floods and tornados in recent years, your standard homeowner’s insurance policy might not contain as much protection as you’d like.
For example, in certain areas, the insurance you need most isn’t covered in a typical homeowner policy. Flood insurance is a common addendum to a policy, but many don’t realize they need it. The common rationale is homes not located in a flood plain don’t need flood insurance, but as many victims of hurricanes and torrential downpours can tell you, a floodplain doesn’t tell you much of anything about your real danger. It is more likely you’ll flood if you live in an area below sea level, but it can happen almost anywhere thanks to extreme weather conditions.
Flood insurance is a good choice for many areas of the country, and also be sure to check to see if wind and hail insurance are part of your plan or if you’ll need to add them later.
Rising Coverage Rates
Typically home prices rise overtime and so do construction costs. Periodically review your homeowner’s insurance to be sure you have enough coverage. Should your home and its contents be destroyed in a fire, for example, your insurance policy will pay out up to the threshold you selected. If you haven’t adjusted your insurance coverage to reflect the higher price of your home and the additional items you’ve bought to put in it, you might find yourself in a position of not being able to rebuild as you see fit.
Deductibles
Nobody plans on using their home insurance, but when disaster does strike, you must first meet your deductible before seeing any benefits. In many cases, your deductible is a percentage of the value of your home – typically one percent. This means that a $5,000 claim will pay out only the portion after you meet your deductible. For a $200,000 home, you’ll be responsible for $2,000 as a deductible and you’ll only get $3,000 from the insurance company.
You might have the option of lowering your deductible, but you can expect to pay higher premiums for the privilege. It is a far better choice to simply save up the value of your deductible and keep it in a savings account. If a pipe bursts and you need new carpet, you won’t want to wait around until you find $2,000 in order to complete repairs. At the very least, know your deductible to determine if your claim is worthwhile. If it doesn’t exceed the deductible, you don’t stand to benefit much from the trouble of filing a claim.
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