When you sign up for a homeowners or condominium
owners insurance policy, you take the first step in protecting what may be
one of your largest assets. It is important to be knowledgeable about the
appropriate amount of coverage needed and the extent of the coverage provided
by your insurance contract.
The homeowners policy is a package that covers your
dwelling, other structures on the premises, unscheduled personal property on
and away from the premises, loss of use, personal liability coverage, and the
medical coverage of others.
Nearly all insurance companies require that your policy be
issued for at least 80% of the replacement cost of your home. Failure to
maintain proper coverage may result in sharing in a partial loss as a penalty.
The correct amount of coverage is determined at the time the
policy is written. Then it is your responsibility to be sure your policy
continues to provide appropriate protection. Most insurers will increase your
coverage by a certain percentage each year to keep pace with inflation.
However, it is important for you to periodically review your homeowners
coverage and make any necessary changes that result from inflation in your area
and adjust for additions or improvements made to your home.
Your homeowners policy also provides protection for the
contents of your home. It’s a good idea to keep an inventory of personal
property in a safe deposit box so that, in the event of a loss, you won’t have
a problem listing the items to be replaced. The contents portion of your policy
has specific limitations on items such as money, jewelry, furs, silverware,
artwork, and securities. Be certain to refer to your policy for a full
description of the limitations. In some instances, you can buy additional
coverage if the basic coverage is insufficient.
When selecting coverage, evaluate the different policy
forms. You can choose between a basic broad form policy that protects
you against a list of named perils such as fire, hail, lightning, wind,
explosion, and vandalism or an all-risk policy that protects you against
all losses except those specifically excluded in the policy. The exceptions
include damage by birds or insects; wear and tear; landslide and earthquake;
cracking from settling; flood and surface water; and damage by domestic animals
or rodents.
You may wish to consider a higher policy deductible and
elect to purchase the slightly more expensive all-risk contract with the
premium saved.
In addition to protecting your property against serious loss
to the physical structure, your homeowners policy may also provide protection
for legal liability in varying amounts.
In view of sizable legal awards that can potentially be
granted, you may wish to protect yourself even further with a personal umbrella
policy.
As you assess your coverage requirements, keep a sharp
lookout for ways to you’re your premiums. By installing smoke detectors, fire
extinguishers, deadbolt locks, or a central alarm system, you can reduce your
costs by a reasonable amount. Evaluate your coverage limits periodically and
make changes when appropriate. When it comes to your home, keeping up-to-date
on your insurance coverage may be more important than “keeping up with the
Joneses”.
