Get To Know Your Homeowners Insurance Policy

This article was contributed by: Marvon Williams, agency owner for American Family Insurance located in Marietta, Georgia

We take tremendous pride in the places we call home. We constantly invest time, energy and cost to make sure these residences fit our ever-changing needs and tastes.

So, what do you know about the insurance that protects your home, sweet home? Maybe you don’t know as much as you should. 

Homeowners insurance protects your home in the event of sudden and accidental damage, subject to the terms of the policy. Different policies offer different types of coverage. So, it is very important to review your options.

As you would expect, policies with broader coverages generally have a higher premium than policies where coverage is more limited. The deductibles and endorsements you select, and the physical characteristics of your home, all play a role in the amount of premium you pay. 

Most homeowners insurance polices have two parts: 

 Section I insures your home and its contents against a variety of causes, or perils, such as fire, hail, wind, lightning, theft and vandalism.

 Section II provides liability protection for situations when a third-party suffers an injury on your property, and you’re found to have some degree of fault. 

A common misperception is that homeowners insurance provides coverage up to the market value of the home. That is not true. You are covered up to the amount it takes to rebuild your home or the limit designated in your policy – whichever is less. Some policies provide coverage for a certain percentage beyond the limit of the policy. 

Remember, the amount of coverage you select will determine the largest amount of money you can receive from your insurance company. If your home is severely damaged or destroyed, the last thing you need to worry about is whether you can afford to rebuild it. 

How much would it take to rebuild your home? It’s a question every homeowner should ask – and answer – to make sure they have adequate homeowners insurance.           

Homeowners insurance policies vary. Some policies provide coverage for damages up to the maximum amount designated in the policy, no more than that. Others provide additional coverage, although it’s often capped at a certain percentage of the policy limit, such as 120 percent. 

That’s why insuring your home to its current value is so important. If your home is seriously damaged or destroyed, the last thing you need to worry about is whether you can afford to repair or rebuild it. 

One national firm estimates that nearly seven out of 10 American homes are underinsured by an average of 35 percent!  There are a number of reasons for this. Some of the reasons include:

  • unreported home improvements
  • rising construction costs
  • in-home businesses 

The amount of coverage you select should be based on what it will take to rebuild the home on the same site – not the market value of your home

I recommend homeowners meet with their insurance agents and review their coverage amounts at least once a year. Even if you haven’t added a room or refinished your basement, rebuilding costs (labor and materials) typically increase at a rate higher than inflation, so an adjustment in coverage may be in order.

Marvon Williams is an agency owner for American Family Insurance. His office is located in Marietta, Georgia. His services include home, auto, life, business and health insurance. Follow Marvon @MarvonAmFam and be a fan on Facebook, www.facebook.com/MarvonWilliamsAgency

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