Navigating Through Your Homeowners Insurance Policy

shutterstock_45992047Homeowners insurance typically covers home-related property and liability risks. However, like many contracts, it can be difficult to fully understand your homeowners policy. However, you don’t need a law degree to navigate your document.

The Declarations Page

The declarations page is like the summary of the entire document, but it also discusses information that is unique to your policy. Even though this page will summarize the agreement, you should still read the entire document. The declaration page will typically have your personal information, such as your name and address. It will also include the policy information, such as policy number, policy period, coverage limits, deductible amount, premium amount and the title. It will also include the name of your insurance agent and mortgage carrier.

The Definitions Section

The definitions part explains the terms and most important concepts of which you should be aware. Make sure to read this section carefully because some of the information may surprise you. You may have assumed you’d have more or less coverage than you actually do.

Section One: Property Coverage

Section One discusses your property coverage and what is and what is not covered. It will also discuss the different types of property coverages and the perils for which you are covered. The four categories of property coverage include your dwelling, other structures (such as detached garage), personal property, and loss of use of personal property. To qualify for reimbursement for property damage, the situation must fall into one of those four categories and be a covered event.

Section Two: Liability Coverage

Section Two also discusses what is and is not covered, but it refers to liability coverage. This is the section that covers you if someone is injured or has their property damaged while on your property. Check this section carefully because in some cases, the insurance company will defend you if you are sued, and in other cases, injuries caused directly by you, your pet or someone else are covered too.

How Much You Can Expect

In your policy, you’ll also find a paragraph that describes the amount you’ll receive for property loss, and there are two methods for calculating payments. Replacement cost is the amount needed to replace or rebuild your property or repair damage using similar materials. Actual cash value is the amount needed to replace or rebuild your property, less depreciation.

Understanding your homeowners insurance policy may seem overwhelming, but it is important you know your coverage limits and exclusions.

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