A home insurance policy might sometimes seem very complicated to the average homeowner. That does not mean that you should immediately chuck it into the nearest drawer without reading it. The terms in that policy might one day determine whether your claim will be fully or partly paid, or rejected.
Important Terms Related To Homeowners Policies
Here are some of the most important terms you have to familiarize yourself with if you want to get the most from your homeowners policy.
Exclusions Or Losses Not Insured. As the name implies, this refers to all the things that are not covered by your insurance firm. Examples include earthquakes and floods. If you live in an area where either or both of these are common, make sure you buy additional cover.
Conditions. This is the part of the policy that determines whether a claim that might otherwise qualify will be paid or not. The policy could, for example, spell out what you have to do to protect your home from additional damage after a disaster. It will typically also require that you inform the police if your home is burgled and draw up a list of stolen or damaged belongings. This section also provides details of the circumstances under which the insurer will have the right to cancel your homeowners policy.
Deductibles. This very important term refers to how much you will have to pay out of your own pocket when you submit a claim. If the wind, for example, blows a tree onto your home and the damage amounts to $10,000, your insurer will typically deduct a certain amount (let’s say $1,000 or $2,000) and then pay the rest. The deductible often differs depending on the nature of the claim. If your TV is stolen, for example, you might have to pay the first few hundred dollars of the claim. If a hurricane causes damage amounting to tens of thousands of dollars to your home, however, the deductible could be a few thousand dollars.
Special limits. If you are the proud owner of a collection of paintings or jewelry worth tens or hundreds of thousands of dollars, a standard homeowners policy may not fully cover these. This is because, when it comes to certain kinds of personal property, insurance companies often have sub-limits or special limits. Jewelry might e.g. only be covered to a maximum amount. Other examples might include items that you use for business purposes, silverware, guns, furs, and cash. To get these fully covered, you will need to buy additional coverage.
Endorsements. This page deals with any changes to your policy coverage. For example, if your homeowners policy does not cover the damage caused by a backed-up drain or sump pump, you will typically have to buy coverage for these via an endorsement. Endorsements are normally listed on a separate page, usually at the end of the main policy.
Declarations. If by now you are starting to feel a bit anxious about your home insurance policy, don’t be. The most important coverage amounts and terms can typically be found on the declarations page. This page is customized for your specific circumstances and sets out things like the premium, coverage amounts, the property that is covered, and any discounts that might have been applied. If you read nothing else, check this page carefully to ensure you are getting the insurance you want.
The Bottom Line About Homeowners Insurance
Homeowners insurance is one of those things most of us don’t fully appreciate until something goes wrong. If you have been dutifully paying your home insurance premiums for years and never submitted a claim you might start to believe you don’t really need it. Nothing is further from the truth. This type of insurance protects you against what could be a disastrous event in return for a relatively small premium.