Real estate column: What do you mean that’s not covered?
December 1, 2016
I would be willing to bet that many people have little knowledge of what their homeowners' policy covers or includes.
When buying a new home, it's easy to overlook the importance of a tiny section in the contract and the impact it can have on your monthly payment. Section 10.5, insurability: "Buyer has the right to review and object to the availability, terms and conditions of and premium for property insurance …"
These policies are often long, detailed, extremely confusing and, oftentimes, until the policy is needed, a homeowner doesn't really know what it all means and how it works.
Depending on the location of your home, your premium may be higher or lower because of wildfire risk, distance to a fire hydrant or fire station. It may be affected by the building materials or whether you are on a floodplain. You should always consult with an insurance agent prior to this deadline, receive a quote for both your required coverages, per your mortgage company, and your coverage options and levels, and get comfortable with your policy and cost on your new home.
Most standard coverage should include at least coverage for the structures, personal belongings, liability and additional living expenses in the event your home becomes uninhabitable.
However, like anything else, it is not necessarily a blanket policy, and there are options and levels of coverage just like your auto insurance or health insurance. Generally, you will need to select additional coverage such as flood and earthquake. In addition, your policy won't likely cover you if there is a disaster due to not maintaining your home.
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There are also time limits in many cases, meaning you will need to report the damage within a timeframe of the occurrence to be covered, such as seven days from the occurrence. Think water damage from a leaking pipe or shower. Such water damage is not considered flooding, and the damage it causes could be covered if you catch it in time.
If you already own your home, it is a good idea to review your policy every year and make sure that the policy is still sufficient. Think of the upgrades you have made over the years.
It's highly possible that your policy has been getting renewed automatically based on values that are listed on the county records. Will that value really cover you in a complete disaster? Does your policy cover you for actual cash value or replacement value? Think depreciation and today's building costs. Can you rebuild your home today that you bought 20 years ago for your coverage amount or replace all your furniture?
Insurance is not just for homeowners. Tenants should consider obtaining renter's insurance. These policies are relatively inexpensive and are great to have to protect tenants. Generally, you will be covered for theft, vandalism, fire, smoke, water damage and even liability.
I would highly recommend that if you have any specific questions about your policy to contact your insurance agent. It is always good to have a local representative as well, as they are advocates for you and can walk you through claims in person. They can take the time to help you better understand how well you are covered.
If you have a topic you would like to see discussed, email Sean at email@example.com.