Friday, May 15, 2020

A better understanding: Demystifying homeowner’s insurance

By Jonathan Priest

Let’s face it. No one wants to pay for insurance. The odds are, nothing bad is going to happen to your home, right? It feels like you’re throwing money away for nothing. You can’t touch your policy (except for the paper it’s printed on), or pull it out of the garage and put a coat of wax on it, and if you do ever need to use it, it will be because something bad happened! 

What insurance can do for you is give you peace of mind; knowing that if something bad DOES happen, you have protection to make you whole again, and bring things back to normal.  There are many terms that can be confusing in an insurance policy contract, and lots of myths that I will review to help you understand what your coverage DOES and DOES NOT do!

Your DECLARATION PAGE contains the “bullet points” of the policy that covers your home.  It states WHO is covered on the policy, the DATES that coverage is effective, the LOCATION of the insured premises, and the MOST the company is legally obligated to pay to bring your home back to the condition it was in prior to a covered loss.  It also lists any lender who holds a lien against the property.

Myth: “My policy doesn’t cover anything.  Every time I call to make a claim, it is denied.”
Fact:  In order to be a covered claim, the damage to your home must meet at least two criteria.  It 
needs to be a “sudden” (sudden = it cannot be damage that happened over a period of time, like pipes rusting out in your bathroom, or carpenter ants nesting in the wood structures of your home, or a deck rotting off the house due to being improperly flashed) and “accidental” loss (the company will not pay if you decide to deliberately set your home on fire).  Finally, it needs to be a loss that your policy affords coverage for.  This is where it can get tricky… NOT ALL POLICIES ARE THE SAME.  Some policies cover more causes of loss, and some cover less. 

Myth: “My neighbor’s tree fell on my house, so their policy will pay for the damages.”

Fact: Your house, your damaged property, your policy.  As long as the tree was healthy, odds are very slim that your neighbor would be found liable.  There are rare occasions where a sick or dead tree falls and damages a neighboring home and it can be verified that the neighbor is negligent by not removing the tree sooner, but by and large, the policy that pays out will be the one that belongs to the damaged home.

Myth: “My house insurance needs to cover my loan amount.” 

Fact: Your insurance coverage needs to be able to pay to rebuild the home, as it stands, from top to bottom. Your loan includes the value of at least two additional things… the land the home sits on, and the relative desirability of the location of that land. 

Helpful tips to improve your protection and maximize savings: use the same company to insure your home and cars; not just for the savings, which can be significant, but also to build a stronger relationship with the company.  If you have a series of home claims over a short period of time, and you insure your cars elsewhere, the home insurer is much more likely to “non-renew” (cancel at renewal) your home policy than if you have the home and auto together!  It is VERY expensive for a company to get a new client, and the more policies you have as a customer, the less likely you are to leave your company.

If you have JEWELRY, FIREARMS, ANTIQUES or SPORTING GOODS (or other items) of significant value, make sure you have SCHEDULED COVERAGE for them.  That means you have provided a bill of sale, appraisal or other document to verify the item’s value, and that those items are much more broadly covered than if they were NOT scheduled.  It is a small extra cost in most cases and usually avoids having to absorb a large deductible in the case of a loss.

Make sure you have adequate LIABILITY COVERAGE, WATER BACK-UP COVERAGE, and watch out for high deductibles!

Please reach out to me if you have more questions about insurance in general, or your policy in particular!  <

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