Are you sure your home insurance policy has you covered if disaster struck? Everyone has heard horror stories where a home was flooded or vandalized, only for the homeowner to find out that their insurance provider won’t reimburse them for their losses. It’s important to take a good look at the policy you’ve purchased to make sure you have the coverage you need – before you find out that you don’t.

What’s Covered?

First and foremost, homeowners insurance covers your primary residence, but it usually covers other buildings and your personal property, too. On the first page of your policy, look at the declarations section. There should be a list of four insured items:

1. Dwelling – This would include your home and anything attached to it. An attached garage would be covered, along with built-in appliances, and your plumbing, heating, and wiring systems.

2. Other Structures – This would describe buildings or outdoor features that are not attached to your home. Detached garages or workspaces, storage sheds, fences, driveways, patios, and retaining walls could all be covered under your policy in this section.

3. Personal Property – This covers your home’s contents, including furniture, clothing, and small appliances. Make sure you declare expensive electronic devices, machinery, artwork, jewelry, and any business property that is stored in your home, as you may need to purchase additional coverage to adequately insure the value of these items.

4. Loss of Use – This outlines the terms your insurance company would reimburse you for if you could not live in your home while repairs are being made.

Following the declarations section, you should see a section that describes your liability coverage. This is usually broken out into two sections:

1. Personal Liability – This insurance protects you in the event you become the target of a lawsuit. It could be the result of something that happened on your property, but it could offer you a level of protection anywhere, excluding car or business-related accidents. This coverage extends to everyone living in your home.

2. Medical Payments – This section outlines what medical expenses would be covered if someone was injured on your property, excluding people who already live in your home.

Other types of insurance riders can be added on, including flood insurance and theft recovery protection. Be sure to speak with your insurance agent for a full list of calamities you are covered against, and which ones you’re not. If you’re uncomfortable with any of the terms, amend your policy immediately.

How Do Insurance Providers Determine How Much to Pay on a Claim?

There are two ways that the amount you’d receive in a claim could be calculated, and it’s important to be comfortable with the method you agreed to.

- Fair Market or Cash Value: If your policy uses these terms to describe how you would be reimbursed, you are only insured up to the current market value of your home, or up to a certain dollar amount. This may not be sufficient if the housing prices in your area have gone down since you bought your policy. If your home were burned to the ground, you could potentially receive less than the balance owing on your home mortgage. Could you afford to continue making mortgage payments on a home you don’t live in to maintain your good credit rating? On the flip side, if home values go up, your insurance policy could end up paying significantly more than what you paid for your home originally.

- Replacement Value: This is the safest insurance policy to have, as long as your insurance policy is kept up-to-date when any major renovations or additions are made to your home. If you incur a loss, you will be paid the amount needed to replace your existing home and its insured contents. If you have this type of policy, read the fine print to determine how long you’d have to rebuild, and how you’d be paid. Some insurance companies require that you replace your items out-of-pocket and then submit receipts to be reimbursed – do you have the cash-on-hand to manage this arrangement? If so, where will you keep your purchases while your home is being rebuilt?

For most people, their home is the largest investment they will ever make, so it’s important to protect it. Although it’s scary to think about how many things could go wrong, knowing you are fully protected will provide peace of mind, and a much less stressful experience should you need to file a claim in the future.

Author Stephen Anderson is an insurance consultant who strongly suggests that you search online to Compare Auto Insurance Companies to be certain of getting the best deal available. Auto Insurance Quotes Missouri is just one example of the state rates you can compare.

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