Many homeowners are not aware if their insurance policy provides adequate coverage or not. As a policy holder you must be in tune with what your insurance policy provides. If your house suffers serious damage, would your homeowners insurance adequately cover for replacement and rebuilding costs? Will it pay if you have to move to a temporary location and for any other related expenses while you are displaced?
You may be spending billions on your homeowners insurance policy but rarely update your coverage. This may leave you considerably underinsured. Say you introduce a new item to your home and fail to notify your insurance provider, you could remain underinsured.
Determine how much insurance you need
As a homeowner you may not always be aware of how much insurance you need. Coverage that is adequate to protect your home when a big loss occurs is what you require. If you have already purchased your policy, you must review it at least once a year to see if everything in your home is covered.
Homeowner’s insurance provides coverage in 4 distinct parts:
- Structure: Your insurance policy should provide cost to rebuild the structure of your home if disaster strikes and destroys your home. However, if you have recently remodeled the structure, your policy must be updated to include additional (if any) renovations charges.
- Possessions: Your policy may offer either replacement coverage i.e. the cost to replace each item or Actual Cash Value (ACV) i.e. the original value of each item after deducting the depreciation cost. For items like jewelry, home theatre system or an art collection, you should consider buying additional coverage.
- Cost of living: If you have to move to a temporarily location due to damage to your home, this policy will provide coverage. It will cover not just temporary residence, but also any other miscellaneous expenses that may accrue.
- Liability: There is a basic liability cost provided by most policies.
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