5 things to know about Homeowners coverage

If you’re like a lot of people, your home is the largest investment you have. As such, properly protecting it in the event of a loss is very important.

When you’re shopping for Homeowners insurance, bear in mind these five things:

  1. All Homeowners insurance companies are not created equal. The financial stability of a Homeowners insurance company is important, as is its reputation for claims handling and payment. Your insurance agent is your local expert; rely on him or her to help you sift through the dozens (or more) insurance companies doing business in your market or state to find the ones you should consider.

  2. Your “Replacement Value,” or Coverage A is critically important (see How to determine Coverage A amounts). 

  3. Consider “Replacement Cost” coverage. In the event of a loss, Replacement Cost pays the dollar amount needed to replace damaged personal property without deducting for depreciation. The amount paid is limited by the maximum dollar amount shown on your policy’s Declarations Page.

  4. Consider “Ordinance and Law” coverage. Let’s say you own a 25-year-old home a block from the beach. Chances are, since your home was built, building codes have changed. If your home is damaged in a storm and you don’t have Ordinance and Law coverage, you will be responsible for paying for the changes necessary as a result of upgraded building codes. In some cases, new building codes mean that homes need to be elevated above the flood line when they are rebuilt, which can be extremely costly. Ordinance or Law coverage pays the extra expense of rebuilding to comply with ordinances or laws that did not exist when the building was originally built.

  5. Understand your deductibles and explore how higher deductibles may lower your premium but always choose deductible levels that you can afford in the event of a loss. The deductible is the amount you’ll owe and will need to pay first before the insurance company pays out on a claim in the event of a loss.