Your Homeowner’s Insurance Policy – Dissected: Part 1 of 5

Your Homeowner’s Insurance Policy – Dissected: Part 1 of 5

By Krista Farmer

If your homeowner’s insurance policy has been stuck in a drawer, cabinet or just tucked mindlessly away somewhere, it is probably about time to pull it out, shake off the dust and make sure it’s still up-to-date. This article is the first in a series of five articles that will help you decipher your homeowner’s insurance policy.

Who has time to labor through deciphering an insurance policy when the house needs cleaning, the fence needs mending, Fido needs a feeding and the kids need to be driven to soccer practice?

Let’s face it. At the end of the day, the only thing a person wants to read is the newspaper or a good book. Reading one’s insurance policy is surely the last thing on the list of “hot reads.”

While keeping your homeowner’s insurance updated is a dismal task, it is of utmost importance. As discussed in a previous article, not only is it important to purchase homeowner’s insurance, it is just as important to know what that policy covers.

Homeowner’s insurance policies contain several different coverage areas.
This article, and some of the next few that follow, will help you make sense of the different sections within your homeowner’s insurance policy.


The most obvious coverage is protection against damage to or destruction of your residential structure. In other words, if your home is destroyed by a tornado, fire, or whatever your policy covers, the insurance company completely replaces or repairs your home.

In this section of coverage, the most important reason to keep your homeowner’s insurance policy updated is because, in the event of disaster, the insurance company will only reimburse you for what your home is insured for.

For example, you purchased your home and homeowner’s insurance five years ago. It is very likely the value of your home has increased since the purchase date. If you purchased the home insurance policy five years ago and have not updated the policy to the home’s current cost to rebuild, the insurance company will only reimburse you for the price you paid five years ago. So, if you purchased the home for $300,000 and the value has increased to $500,000, you’re losing $200,000 – quite a large sum.

In the end, it is essential to keep your homeowner’s insurance policy updated because you want to be sure your home is insured for 100 percent of the replacement cost. (Some policies automatically update to your home’s current value. Does yours?) While it is easy to let that dust settle over your policy from year to year, keep in mind that putting it aside could cost you much more in the end. Your homeowner’s insurance policy may make heavy reading, but it will be even more burdensome should it be out-of-date.

To read more articles about health, auto, life and homeowner’s insurance, visit our insurance articles page.

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*Please note that this article is not a professional consultation. This article is for general information only. Always seek specific information from a licensed insurance professional.*

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