Homeowners Insurance Guide of 2023

Insurance is something that is constantly changing. Homeowners’ insurance is designed to cover your home and belongings if some disaster or catastrophic event causes damage or loss. It can also cover liability for accidents or injuries that happen on your property and will protect you from all manner of events. While your mortgage company (and your state) will require a certain level of home insurance coverage, it’s also a good idea to know what you need beyond those basic requirements.

What Does Homeowners’ Insurance Cover?

A standard homeowners’ insurance policy provides an array of coverage. It will cover the dwelling, or the home itself, as well as any attached and detached structures. However, you must declare all the structures on your policy for them to be covered. And if you make changes, such as building a shed or replacing a fence, you’ll want to notify them so they can update your policy.

Homeowners’ insurance also covers:

·  Personal property

·  Loss of use (temporary living expenses)

·  Personal liability

·  Medical payments

You will typically get to choose the coverage amount that you want, but there may be limitations on what is covered and what isn’t, so be sure to check out any exclusions and limitations on your policy.

What Won’t Be Covered

Typically, anything that is related to floods or earthquakes will require separate coverage. Home insurance also won’t cover things like:

·  Sewer and drain backups

·  Landslides and sinkholes

·  Wear and tear

·  Neglect

·  Mold, vermin, fungus, or bird infestation

·  Power failure

·  Nuclear hazards

·  Government actions, including war

If there are items or events that you want to be covered, you can ask your insurance agent about endorsements and riders that you can add to your policy. For example, you may want to purchase a separate flood insurance policy and make sure that you have windstorm protection if you live in a hurricane-prone state.

Definitions and Things to Know

In addition to understanding the basics of coverage, there are also some terms and elements to understand about the homeowners’ insurance that you purchase. For example, what you have in terms of actual cash value versus replacement cost coverage will impact what your claim pays and how.

Actual cash value

This refers to the current value of the property that is damaged, in case, with depreciation factored in. For example, if a TV is ruined that cost $500 three years ago, it might only be worth $150 now. With actual cash value, or ACV, that’s all the insurance would pay.

Replacement cost

There are multiple types of replacement cost coverage, including extended coverage to fix your home even if it goes beyond average market value. Some insurance companies even offer guaranteed replacement cost coverage, but that’s not always available. This coverage will ensure that instead of being paid that $150 for the old TV, you’ll be reimbursed enough to replace it with a like model.

Deductibles

Homeowners’ insurance also has deductibles that you have to pay before coverage will kick in. This will either be a flat dollar amount, such as $1,000 or $2,000, or it may be a percentage of the insured value of your home, in which case it’s usually one to two percent of the home’s value. Instead of actually “paying” the deductible, it’s subtracted from your claim check when the claim is paid.

You may also have separate deductibles for specific claims, such as natural disasters or extreme weather. Check your policy for details.

Home insurance doesn’t have to be complicated. If you haven’t reviewed your policy for 2023 to ensure that your coverage is in line, now is a great time to do so.