Your home insurance policy can be densely written with legalese and industry jargon. However, it is not something you should ignore. The words on your policy can make all the difference in whether you are fully covered or have to spend thousands of dollars to fix your home.
Here are some key terms you should look out for when reviewing your homeowners policy. Also, tips on where to find the most important information.
Declarations
“The good news is that even though policies can run to dozens of pages, the most important terminology, coverage amounts, and information are located at the beginning of the declarations page,” Landy Liu (general manager of insurance products for Better, an online mortgage provider) says.
The declarations page can be customized to your home and includes details such as the property address and coverage amounts. It also lists any discounts or premiums that have been applied.
Steve Wilson, senior underwriting manager at Hippo Insurance, suggests that you carefully review the declarations to ensure everything is correct. Contact your carrier or agent if it does not.
Deductible
On the declarations page, deductible is another important detail. This is the amount that you are responsible for in case of a claim.
Imagine a storm blowing a tree onto your home, causing $10,000 in damage. The insurance company will cover $9,000 for repairs if your deductible is $1,000.
Depending on the type and nature of the claim, your declarations page might list multiple deductibles, according to Angi Orbann (Vice President of Property Insurance at Travelers). For example, if you live near the coast, your hurricane deductible might be higher than that that that applies to other claims.
In many cases, hurricane or windstorm deductibles are a percentage of your dwelling coverage, rather than a flat amount. This is according to Joseph Sanzo, a property-casualty specialist at Barnum Benefit Advisors. If your home is insured for $250,000, and you have a hurricane-deductible of 3% you would be responsible for the first $7500 of damage following a hurricane.
Exclusions
The declarations page will list the coverage you have but not what it covers. Look for headings such as “exclusions” and “losses not covered” in your policy to find that information.
There will be a long list of situations your insurance company doesn’t cover. This includes major disasters like earthquakes and flooding. Orbann states that you can purchase additional coverage if your home is at high risk of these disasters.
Wilson advises, “Be proactive and speak to your insurance company.” Is it prone to flooding? Do you have other coverages I might need? An agent can help you identify gaps in coverage and fill them.
Endorsements
An endorsement is a common way to fix these gaps. It changes or adds coverage.
Wilson says that while most homeowners insurance does not cover damage caused by backed-up sump pumps or drains, you can add coverage to your policy through endorsements.
Endorsements are usually listed separately from your main text, and often at the end.
Limitations
You may not be covered fully by your standard homeowners policy if you have valuable personal possessions, such as a costly engagement ring or an extensive art collection. Orbann states that insurance companies frequently list “special limits” or sublimits for certain types personal property.
Jewelry theft may be covered up to $1,000. Cash, silverware and furs are also covered.
To add coverage to your policy, contact your agent. A possible appraisal might be necessary.
Conditions
It’s worth looking at the “conditions” section of your policy. They explain how you can get the coverage that you are entitled to. Wilson suggests that you read these sections of your policy to ensure you fully understand the process for filing a claim. Your claim may be denied if you do not meet these conditions.
Your policy may also have other provisions that allow you to file a claim.
- After a disaster, protect your property.
- If your belongings are taken, notify the police.
- Make a list of all damaged or stolen items.
Other important information is often found in the conditions section, such as reasons why your company might cancel your policy.
Are you still unsure about your homeowners’ insurance? An agent can assist. Liu advises that you speak with an agent who will help you understand your situation.
