Guest post from Bailey Harris. Bailey writes about insurance and other topics for Homeownersinsurance.org.
Buying an insurance policy can be tricky. Every company offers different levels of coverage for different prices. You should look your policy over carefully on a regular basis to make sure there aren’t any gaps in your coverage. The following guidelines will help you review your policy and make decisions about your coverage levels.
The term “dwelling” refers to your house. But this portion of your insurance policy also covers attached structures and fixtures in the house, such as built-in appliances, heating and cooling systems, plumbing systems, and electrical wiring. Your dwelling should be insured for the amount it would cost to rebuild. Although experts used to recommend purchasing enough insurance to cover 80 percent of replacement costs, you are much further ahead getting a policy that offers 100 percent replacement value coverage. This ensures that you don’t have to cut corners if you’re forced to rebuild.
If you own a garage, shed, barn, gazebo, fence, patio, or another type of structure that is not attached to your dwelling, it will fall under the heading of “other structures”. As with your dwelling, you will want to make sure that you have enough insurance to cover 100 percent of the costs required to rebuild.
Personal property insurance provides coverage for the non-structural items in your home and on your property. There are two types of personal property insurance: cash value and replacement value. Cash value coverage will pay you the value of the property at the time of loss. You will not receive the amount paid for the possessions or the amount needed to replace them. Replacement value coverage pays the actual cost of replacing your possessions. Cash value coverage is cheaper, but replacement value coverage is the better deal.
Loss of Use
Not everyone has loss of use coverage, but it is worth including in your policy. This type of coverage will pay for your living expenses if you are forced to temporarily live somewhere else because of a fire or some other disaster. You may also be reimbursed for restaurant bills, commuting costs, and other fees associated with living somewhere other than your home.
Personal liability coverage protects you against a claim or lawsuit that might be filed because someone was injured on your property. This type of insurance may also cover damage to other people’s property. In addition to general liability coverage, you can also purchase medical payment coverage that will pay the medical expenses of people (not you or your family) that have been injured on your property. Liability levels can vary. You should speak with your insurance agent if you need help assessing your risk.
The average home insurance policy does not cover flood or earthquake damage. You will need to purchase separate policies to get this coverage. You can buy both flood insurance and earthquake insurance from private companies. Flood insurance is also available from the Federal Emergency Management Agency. Coverage can be expensive but should be purchased if you live in a high risk area.