How to Read a Homeowners Insurance Policy

Purchasing a home is a major investment and should be protected with a homeowners insurance policy. Knowing and understanding the coverage provided by a company is imperative to the protection of the investment.

Understanding the policy will allow the homeowner to be aware of any deductibles that need to be met before payment is made, exclusions to the policy, and the type of coverage that best suits the homeowner’s needs.

There is a vast amount of coverage available for each individual policy. The insurance policy will protect homeowners from damages and losses against not only the house but personal property as well. Protection is provided in the event of an accident, injuries, or damages that may occur on the property.

It is often important to understand the terms that are used within the insurance policy. Common terms that should be understood include dwelling, personal property, other structure, endorsements, loss of use, additional property coverage, and peril. Understanding these key terms will lead to increased knowledge about the individual policy, which will ensure the right coverage is chosen.

Dwelling refers to the house in itself as well as attached fixtures and structures. Personal property includes items that are owned by the policy holder and family members. Insurance policies often cover these items on a cash value or replacement-cost basis. Endorsements are additions to the policy for extra protection. Each endorsement is protected for a supplementary price. For example, replacement coverage for such items as jewelry, collectibles, computers, etc. Other structure is a term that is used to describe items that are detached from the house, items such as garages, fencing, and sheds. Loss of use refers to coverage of living expenses that may be relevant if the homeowner is unable to live in the home due to repairs or other similar circumstances. Peril accounts for the cause of injury, destruction, or loss. Examples of peril include vandalism, fire, and weather. Additional property coverage includes such things as the removal of damaged property, necessary repairs to the home.

The amount of insurance necessary is dependant upon each individual need. Enough insurance should be purchased to protect the homeowner from high out-of-pocket expenses. Another important factor to be taken into consideration is the amount of liability insurance in the event of an injury occurring on the property. Increased coverage may need to be purchased if the homeowner has many valuable possessions.

Insurance agents are available to assist homeowners with their insurance needs. However, the only person who truly knows the exact coverage necessary is the homeowner. Many factors should be taken into consideration before choosing a policy. For example, how much of the expense can be paid out of pocket in the event of an unforeseen loss, what items are of value to the homeowner, and how much each item is worth. With the homeowner’s knowledge of insurance policy options and the help of an experienced agent, the optimal coverage will be chosen along with peach of mind.