The first step in determining if home insurance can cover your losses is to understand what happened. Insurers say the event must be a covered peril. This means it must be something your policy covers.
Home insurance does not cover instances of poor maintenance and upkeep. It does not cover damage you cause to your own home. And, it may not cover floods or earthquakes in some areas. Your agent works with you to determine the cause of the loss. Then, if the policy covers it, the process moves on.
What Type of Coverage Do You Have?
Homeowners with full replacement cost value are likely to get the most help here. In this case, the insurer determines if it is possible and affordable to make repairs to the structure. If not, the insurance company totals the home. From here, it then determines the value of the home. Here is where things can become difficult.
If your home does not have replacement value, that means the policy pays out the amount listed on the plan based on the value of the home at the time of the accident. That's the home's cash value. However, the value of the home is never the same as the cost to rebuild it.
Generally, it costs more to rebuild a home from the ground up. If you have replacement cost, the insurance company covers the cost to rebuild the home to the same standards as before the accident.
What’s Inside Matters, Too
Most insurance policies cover personal belongings as well. This generally falls between 20 and 50 percent of the total coverage on the home. It covers items you lost as a result of the covered incident.
Will home insurance help you if your home suffers a loss like a fire or a storm? You do not want to have to ask this question. Rather, you want to know the type of insurance you have in advance.
Talk to your agent about your coverage. Upgrade or modify it to better provide the protection your home needs from these common risks.