If you’re like many people, your home is your biggest investment. This is why it’s important to have insurance coverage that keeps you well-protected. How do you know if you’re making the right choice? It’s a lot easier to feel good about your decisions when you understand the language in the policy. Here are some of the common terms you may see as you’re shopping.
A type of home insurance that covers losses or damages caused by any peril, unless specifically excluded in the policy.
A deductible is the amount you will have to pay each time you file a homeowners insurance claim—it’s a way for insurance companies to discourage frivolous claims. Note that it’s common for companies to offer different deductible options depending on the type of claim. (For example, you may have a higher deductible for hail and wind damage if you live in an area that is prone to those types of storms.)
Liability is a very important component of homeowners insurance that covers legal situations like bodily injury or property damage lawsuits that can be brought against you and your family members, including your pets. Costs covered can include attorneys’ fees, damage awards, medical bills and more.
This coverage kicks in if you are unable to occupy your home for an extended period of time, paying for everything from hotel charges to the cost of restaurant meals to temporary storage unit rentals. For landlords, it can reimburse you for the loss of rental income while the dwelling you own is under repair.
This coverage is intended to pay for relatively minor medical costs that may be incurred by someone else while they are on your property, e.g., your friend accidentally gets elbowed during a backyard basketball game and breaks their nose. This is different from liability coverage, which covers more substantial medical claims.
A type of home insurance that only covers losses or damages caused by perils specifically listed in the policy.
These are items other than your home that are on your property such as a shed, detached garage, in-ground swimming pool, fence, gazebo, etc. Coverage amounts for other structures is often a fixed percentage of the insurance company’s valuation of your home.
The term perils refers to a large variety of events that could cause damage to your home—everything from windstorms to fires to theft. When shopping for a policy, it’s a good idea to ask both which perils are covered and which ones aren’t for an apples-to-apples policy comparison.
This refers to the things inside your home—everything from appliances to clothing to furniture to electronics. It’s important to note that certain expensive or rare items (like pricey jewelry, collectibles or fine silverware) usually require a special policy add-on, and you’ll be charged an additional amount to cover those items.
A premium is the amount your insurance company charges to provide your coverage. For many homeowners, the cost of their annual premiums is paid with escrowed funds by their mortgage company, which wants to ensure that the property is continuously insured.
This coverage ensures that your home and the items in it are restored to the way they were before your claim occurred. Compare this to actual cost value, which pays for your home and belongings less the cost of depreciation, which can lower the value of your claim substantially.
Your home is one of your biggest assets and it is important to know all you can about your coverage. Check out these articles to help.
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