For most of us our home is our most valuable asset, yet we tend to only scratch the surface of what a Homeowners Insurance policies do for us. Let’s take a look few myths or misconceptions about Homeowners Insurance and and what it means.
After a covered loss, all I pay is my deductible.
In many cases your Homeowners insurance policy is designed for either Actual Cash Value or Replacement Cost Value, this can apply to your entire home or important home systems like your roof.
Actual cash value settlement is what you would pay for what was lost today minus applicable depreciation.
Say your roof is 15 years old and insured with Actual Cash Value. With an Actual Cash Value settlement you will typically find that the amount of your final claim settlement will be reduced based off of the condition and age of your roof at the time of loss.
This type of settlement could lead to a Homeowner having to pay out of pocket for part of the new roof or repairs in addition to your deductible.
Replacement Cost Settlement is the cost associated with replacing what was damaged at the time of loss.
Take that same 15-year-old roof mentioned above insured by a Homeowners insurance policy with Replacement Cost Settlement on the roof. After a covered loss the roof will be repaired or replaced minus the deductible. Companies will typically make a first Actual Cash Value payment to the insured, then after the repair or replacement is done Homeowners can submit for a second payment for ‘Recoverable Deprecation‘.
Sometimes actual cash value is the only settlement option with certain homes or types homeowners Insurance. The best rule of thumb is reviewing the policy and talking with your company or agent about how the policy will settle claims to your home.
My homeowners insurance covers me for 100% of what I owe, that’s all I need.
No one wants to think about a total loss to their home, but it is something that needs to be talked about. In the case of a catastrophic loss, its important to make sure the estimated replacement value is accurate for your home.
Most consumers have the ability to insure their home for Full Replacement Value and then some. Many companies offer ‘extended coverage limits’ that will provide additional replacement cost coverage in the event of a catastrophic loss.
In catastrophic events like the tornado that hit Joplin, the demand for materials and other resources to rebuild can go up drastically. The cost to replace homes can dramatically increase in a matter of weeks. Having accurate replacement values and extended limits are key to getting you back to whole after a loss.
Home Insurance only covers your home.
Homeowners insurance is designed to protect more than just your home and belongings. It is designed to cover many aspects of risk Homeowners are exposed to. Here are some examples;
Liability Coverage
This coverage will help protect you or a household member during a claim who are found legally responsible for causing bodily injury or property damage to others
Personal liability protection generally has limits of $100,000, $300,000, or $500,000. In many cases the difference in price between the three are minimal compared to the peace of mind and protection you will receive.
Loss of Use
What happens if Homeowners have to live away from your home after a covered loss? Many Homeowners insurance policies cover loss of use. This means a policy will pay additional costs associated with living away from your home after a covered loss.
Other Structures
Homeowners policies can pay for covered damages to detached structures such as fences, sheds, detached garages on your property.
What else does my policy cover?
Many other things can be covered like small watercraft, golf carts, shrubs, grave markers, and more. Consumers should make sure to read their policies and declaration pages. Having a local Agent or Broker can be a great resource when questions come up!
My Insurance Company offers me a Huge Discount for bundling.
Many consumers believe that when their Homeowners insurance is bundled with Auto insurance they are getting the best rates. In many cases this is true, but not in every case.
In some cases homeowners will see lower costs by Un-bundling. Specifically looking for the most competitive rates for the policy types that are needed. This could be the best way to purchase, but remember everyone’s situation is different, having a knowledgeable agent or broker that understands your needs can be key to ensure consumers have the right coverage at the best price.
My Homeowners Policy covers an earthquake.
Why is Missouri at a higher risk?
Most insurance companies don’t automatically include earthquake coverage in homeowners policy. Earthquakes aren’t common in Missouri, but it’s important to remember Missouri sits in The New Madrid Seismic Zone. This is the most active zone east of the Rocky Mountains.
Trusted Choice reported that there were more than 21,000 earthquakes of magnitude 3.5 or greater in the U.S. between 1974 and 2003.
If our state were to experience a major earthquake, many homes could be seriously damaged. Most Homeowners can purchase earthquake coverage though an endorsement on their Homeowners insurance. It’s important to know that some companies don’t offer this coverage.
When your Homeowners insurance company doesn’t offer Earthquake coverage Consumers can purchase a stand alone policy with a company like Palomar Specialty, policies like this can offer coverage for your Home, Personal Possessions and more.
Reminder: Everyone’s situation if different. These situations or concepts may not apply to you. We recommend you talk with your Agent, Broker, Insurer or legal counsel about your individual needs, factors, coverage and exposure.