There are many misconceptions regarding homeowners insurance. If you're buying a home for the first time, it is important to understand homeowners insurance. So here are the top three things that every homeowner should know about their policy.
1. Flood – Under the homeowners policy, losses resulting from flood is excluded. Many homeowners find this out the hard way when a flood loss occurs and they’re not covered. According to the National Flood Insurance Program's website, Flood is defined as:
· A general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or of 2 or more properties (at least 1 of which is the policyholder's property) from:
--Overflow of inland or tidal waters; or
--Unusual and rapid accumulation or runoff of surface waters from any source; or
· Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.
Flood insurance is facilitated through the National Flood Insurance Program. For a quote request, click here.
2. Replacement Cost Value vs. Market Value - Under most homeowners policies, the dwelling is insured on a replacement cost basis; meaning we cover the expenses to actually replace your home. Many homeowners get in a bind when they request to insure their home at Market Value. Insuring your home at Market Value means insuring your home for what the house is worth on the market. This number takes into account land and the desirability of the surrounding areas. If you insure your home at Market Value, you take the risk of either over or under insuring your home.
To determine the replacement cost of your home most agents perform a Replacement Cost Estimator. The agent inputs information about your home like the type of dwelling, square footage, type of materials for the exterior and interior, number of kitchens and bath, etc. The Replacement Cost Estimator will determine the amount of money it would take to replace your home and *TA-DA* you've got your dwelling amount.
3. Personal Liability - Personal liability is a large exposure that many homeowners over look. Liability coverage responds when someone gets injured on your property. If the injured party sues you for negligence, how much coverage do you think you would need to pay the damages? Many homeowners policies carry $300,000 liability coverage limit. However, you can always increase these limits for a few dollars more a month.