It is only in a natural disaster’s wake that many homeowners finally realize exactly what coverages they do and do not have on their home insurance policy. And homeowners in areas prone to hurricanes such as Miami and several other parts of Florida, Texas, Alabama and Louisiana should be especially aware. Many are caught by surprise that certain things are not covered and others are shocked by the different deductibles and sublimits that apply to various coverages. A recent story by NJ.com points out the fact that many New Jersey homeowners affected by superstorm Sandy do not have a good understanding of their home insurance policy’s coverages. While it may seem daunting to know every detail of your policy, you should at least know these three main components:
Your home insurance policy does not pay an infinite amount of money in the event of a loss. When you purchase your policy, you select the amount of coverage you need to replace your home and possessions. However, while you might be aware of the two main limits for the dwelling and personal property, you might not realize that many other sublimits are set for other items. For example, items such as jewelry and electronics have much lower limits of coverage, regardless of your overall personal property limit. Read through your policy to understand where these lower sublimits apply. If the coverage is insufficient, work with your insurance company to increase them. In many cases, insurance companies can raise the sublimits for additional premium but do not automatically ask homeowners if they are interested in doing so. It is up to you to evaluate your personal needs.
Your home insurance policy will usually have several different types of deductibles. As with the limits of coverage, most people tend to focus on the main deductible collected by the insurance company in the event of a claim. However, sometimes larger deductibles are set for certain types of losses. If you specifically purchased coverage for earthquake, flood, or windstorm coverage, you might find that the deductible is not a specific dollar amount, but rather a percentage of the claim amount. This can add up to a much larger deductible than you anticipated. On the other hand, in the event of certain other losses, no deductible may be set at all. As an example, when you have a minor claim, such as a credit card or forgery claim, the policy usually does not charge any deductible amount. While this is one of those coverages with a lower sublimit, the benefit is that no deductible applies.
- Covered Perils
One of the main mistakes homeowners make is to not understand the perils covered by the home insurance policy. Most standard policies will not cover losses from earthquakes, earth movement, and flood. While these terms may seem simple and straightforward, within the context of the home insurance policy they may be more difficult to understand. If you are faced with a water damage claim, you have to understand exactly how your insurance company will characterize the source of the water. If the water was a result of falling rain or snow, you should not have a problem. However, if the water was a result of storm surge or some other form of rising water, you may be faced with a flood claim, which is not covered.