The Ins and Outs of Home Insurance Policies

Once the dust has settled from moving into your home, you may want to review your home insurance policy. Indeed, it’s always a good idea to regularly review your policy to give you peace of mind that you have properly protected your most valuable asset.

The policy is usually divided into two parts. The first section typically deals with property coverage, and the second section usually deals with liability coverage. The section on property coverage includes the following groups:

Dwelling: This includes your home.

Other Structures: This includes things like garages and sheds.

Personal Property: This is quite broad and includes all of your stuff anywhere in the world. It also includes other people’s stuff while it is kept at your home.

Loss of Use: This covers costs associated with additional living expenses.

Coverage is provided, presuming that the limit requested is on an “insurance to value” basis. This means if the cost to rebuild your home in the same condition it was prior to the claim is $100,000, then the limit of insurance is $100,000. This is also called replacement cost.

There are cases where you might not want to insure your home for the full replacement value. Your mortgage lender may not require it. You may buy $60,000 of coverage. Using that “insurance to value” concept, the carrier insures $60,000 and you insure the other $40,000. Your home is considered to be insured on a 60% coinsurance basis.

A benefit of coinsurance is that you still receive the full replacement cost at the time of a claim. If this coinsurance option is chosen, many carriers require that you carry a minimum of 80% of the dwelling’s value.

In addition to knowing your limit of coverage, it is also important to know how your insurance carrier settles claims.

The conditions section of the policy outlines the loss-settlement provision and whether or not the coinsurance provision applies.