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How To Read Home Insurance Policy

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Basic Information On The Homeowners Insurance Declarations Page

Homeowners – Understanding how to read your policy

At the top of the declarations page, your homeowners insurance policy number will be listed you may need your policy number whenever you sign in to your account online, contact your company over the phone, or file a claim.

The declaration page will also list the policy period, which spans from the when the policy goes in force, or the effective date, to when the policy expires. The dates will be precise, including the specific day, month, and year.

It will then detail all relevant parties to the policy, which may include:

Your dec page may also list the build and utilities information about the insured property, such as:

  • Homeâs construction type

  • Roof type

  • Primary source of heat

Lastly, your declaration page may indicate how you receive payouts for a covered loss when you submit a personal property claim. When setting up your policy, you choose whether youâll be reimbursed for the actual cash value of an item, meaning its value minus depreciation, or its replacement cost.

Replacement Cost Vs Actual Cash Value

If your home is destroyed, your homeowners insurance company isnt likely to simply write you a check for the amount listed on your policy. Your payout could differ depending on the cost to rebuild and the coverage you chose and much of it will be paid directly to contractors rebuilding your home, in many cases.

One key decision is whether to choose coverage that will pay whatever it takes to rebuild your home, even if that cost exceeds your policy limits. This situation may arise, for instance, if construction costs have increased in your area while your coverage has remained level. Heres a rundown of several options you may encounter.

Actual cash value coverage pays the cost to repair or replace your damaged property, minus a deduction for depreciation. Most policies dont use this method for the house itself, but its common for personal belongings. For items that are several years old, this means youll probably get only a fraction of what it would cost to buy new ones.

Functional replacement cost value coverage pays to fix your home with materials that are similar but possibly cheaper. For example, damaged plaster walls could be replaced with less expensive drywall.

Replacement cost value coverage pays to repair your home with materials of like kind and quality, so plaster walls can be replaced with plaster. However, the payout wont exceed your policys dwelling coverage limits.

» MORE:10 home insurance exclusions you need to know about

Recommended Coverage: Equal To Your Homes Replacement Cost

Dwelling coverage is the part of your homeowners insurance policy that helps pay to rebuild or repair your home and any attached structuressuch as a garage, deck, or front porchif theyre damaged by a covered peril.

Ideally, your dwelling coverage should equal your homes replacement cost. This should be based on rebuilding costsnot your homes price. The cost of rebuilding could be higher or lower than its price depending on location, the condition of your home, and other factors.

Your insurance agent or an appraiser can calculate rebuilding costs for you. Alternatively, you can estimate the cost by taking your homes square footage and multiplying it by the local building cost per square foot for your type of house. For instance, if your home is 2,000 square feet, and the local building costs are $100 a square foot, it would cost about $200,000 to replace your home. A local real estate agent or appraiser should know the average building costs in your area.

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A Home May Be Your Largest Investmentmake Sure You Adequately Protect It

    If you own a home, you may wonder how much homeowners insurance you really need. After all, the more coverage you have, the higher the premiumsand you probably want to avoid paying more than you need to. Still, if you dont have enough coverage, could you afford to rebuild your home and replace your belongings if a disaster were to strike?

    The good news is that you can fine-tune your homeowners insurance policy to make sure you have the right typeand right amountof coverage.

    Whats Not Covered By Homeowners Insurance

    You may want to read this: Homeowners Insurance ...

    Even the broadest homeowners insurance policy wont cover everything that could possibly go wrong with your home. For example, you cant intentionally damage your own house, then expect your insurer to pay for it. Policies also typically exclude damage from other causes, such as:

    • Flooding, including drain and sewer backup.

    • Earthquakes, landslides and sinkholes.

    • Infestations by birds, vermin, fungus or mold.

    • Wear and tear or neglect.

    • Nuclear hazard.

    • Government action, including war.

    • Power failure.

    However, you can buy separate coverage for some of these risks. Flood insurance and earthquake insurance are available separately, and in hurricane-prone states, you may also need or want windstorm insurance.

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    What Is A Homeowners Declaration Page

    A homeowners declaration page summarizes your coverages, as well as your personal and home information.

    The page lists all parties who are involved with the policy in any way. This includes you — as the named insured party — your insurance agent and your lender. Contact information typically will be listed on the policy.

    On the declaration page, you will find basic information such as the:

    • Policy number
    • Policy period — the effective date and the expiration date
    • Address of the insured premises

    However, the most important part of the homeowners insurance declaration page is the list of coverage types and limits that apply to your policy. Here is where you will learn about how much coverage you have for things like:

    • Dwelling coverage
    • Liability coverage
    • Guest medical protection

    The declaration page also lists such important details as the premium amount you are paying for the coverage, the deductible that applies to the policy and any discounts that help trim the cost of your policy.

    It is important to note that the declaration page is designed to be a readable summary for the homeowner. It is not intended to list every coverage you have down to the smallest detail. For that information, you will have to dig deeper into the policy or contact your agent.

    How Much Does Homeowners Insurance Cost

    The cost of your policy is going to depend on you. That said, knowing some averages can help you shop informed. The average homeowner in the United States pays just over $1,220 for their policy each year.

    How much youll pay depends largely on where you live. States that are prone to natural disasters like Florida and Louisiana with a high exposure to hurricanes pay significantly more. Floridians top the country in homeowners insurance costs with average annual premiums of $3,575. Homeowners in protected states like Idaho and Utah only pay about $600 each year for their coverage.

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    Section C: Personal Property Damage

    Section C covers the items that you keep in your home. This can include everything from high-end stereo equipment to your childrens clothing. Like Section A, you have some flexibility here, so choose a coverage amount that makes you feel comfortable. Ideally, your policy can replace everything you own after a burglary or extensive damage to the house.

    In most cases, insurance companies will assume that your personal property is worth about 5075 percent of your homes value. That means that if your home is valued at $300,000, a standard coverage plan will generally cover up to $150,000$225,000 in personal property coverage. Read your policy to see how much personal property coverage you have and go over your home inventory with your agent to make sure its enough.

    How Much Homeowners Insurance Do I Need

    Understanding A Homeowner’s Property Insurance Policy

    According to Insurance.com, if you have a mortgage, your lender will require a minimum amount of dwelling and liability coverage. That coverage protects your investmentas well as your lenders.

    About 60% of all homes in the U.S. are underinsuredby an average of 20%according to a report from housing data firm CoreLogic.

    Conversely, if you dont have a mortgage, you dont have to buy homeowners insurance. Of course, while coverage is technically optional, it would be very risky to leave whats probably your largest asset unprotected. Instead, a good rule of thumb is to have enough homeowners insurance to:

    • Rebuild your home
    • Cover injuries and damages that happen on your property
    • Reimburse your living expenses while you cant live in your home

    Standard homeowners insurance policies have four types of coverage that help you reach these goals: dwelling coverage, personal property coverage, liability coverage, and additional living expenses coverage.

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    Home Insurance Policy Exclusions

    A policy exclusion on your homeowners insurance indicates a loss or scenario that is specifically not covered. The dwelling coverage is typically determined on an open perils basis, which means if coverage is not specifically excluded, it is included. For personal property, coverage is based on named perils, which means if the loss is not included, it is excluded from coverage. Policy exclusions and claims basis are detailed in the policy jacket and can differ by company and policy type.

    Most homeowners insurance policies exclude the following perils:

    • Normal wear and tear
    • Mechanical breakdown
    • Mold and fungus

    Damage from a flood is also not covered under a home insurance policy. Some carriers may offer flood insurance separately or you can purchase it directly from the National Flood Insurance Program .

    Do You Need House Or Condo Insurance

    Home insurance policies are different when depending on whether you are living in a condo or in a house. In fact, a condo owner will have to sign two contracts: one for the building and a second for their property. In the case of a homeowner, it can be useful to have the property appraised by an expert rather than relying on the municipal assessment.

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    Remember The Basics: Homeowners Insurance Coverage

    Your homeowners insurance coverage should cover:

    • Physical damage to your house and other structures on your property
    • Damage to your belongings
    • Additional living expenses if you have to live somewhere else while your home is repaired
    • Personal liability and medical expenses in case you are liable for an accident or injury on your property

    Check your policy to see your limits, covered causes of damage and any exclusions to your policy youd need add-on coverage for.

    Things To Look For When Choosing A Home Insurance Policy

    How to read your ã?Homeowners Insurance Policyã

    by Christy Bieber | Aug. 31, 2021

    Many or all of the products here are from our partners. We may earn a commission from offers on this page. Its how we make money. But our editorial integrity ensures our experts opinions arent influenced by compensation. Terms may apply to offers listed on this page.

    Choosing the right policy can provide essential protection at the right price.

    Choosing the right homeowners insurance policy is important. After all, for most homeowners, their house is their single largest asset — and it is also where they keep all of their valuable possessions.

    Unfortunately, it’s not always easy to figure out what the best policy is. To find the perfect insurance carrier for each home, homeowners should look at three key features:

    • Price
    • Customer service and claims handling
    • Coverage options

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    Minimum Coverage Is Not Enough

    Meeting the state requirement is one thing, but having enough coverage to cover the cost of a new car, medical bills or a lawsuit is quite another. In California, the minimum required property liability coverage is $5,000. In 2015, the average cost of a new car was around $33,000. If you were at fault for totaling the other drivers brand-new vehicle, youd be stuck paying the $28,000 out of pocket.

    “A major mistake that many consumers make is opting for the minimum state required coverage, warns Worters. The minimum coverage for bodily injury may be as low as $10,000 per person. In today’s litigious society, that is not enough.”

    “You should carry enough liability to protect your assets in the event of an accident. It’s possible to get additional coverage with a Personal Umbrella or Personal Excess Liability policy,” advises Worters.

    Recommended Coverage: As Much As You Can Afford

    Liability coverage is the part of your homeowners policy that kicks in if someone is hurt on your property. According to NetQuote, five common liability claims that homeowners face are:

    • Dog Bites. Some dog breeds are considered high risk and arent covered by standard policies. Check with your insurance agent if you have a pit bull, an Akita, German shepherd, or another dog breed that could be deemed dangerous. Also check to see whether you are covered if your dog bites someone who is not on your propertyat a park, for example.
    • Home Accidents. Youre liable even if someone comes onto your property uninvited and gets hurt.
    • Falling Trees. You may be liable if a tree on your property falls and hurts someone or damages a car or neighbors home.
    • Intoxicated Guests. If one of your guests becomes intoxicated, you could be liable for any harm that person causes other people or property.
    • Injured Domestic Workers. If you hire people to clean your house or take care of your lawn, you could be liable if theyre injured on the job.

    Most homeowners insurance policies have at least $100,000 in liability coverage. Its a good idea to bump that up to at least $300,000or more if you can afford to do so.

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    Review After Changes And Renewals

    When you make changes to your policy, such as adding or removing a car or driver, you should be sent a new declarations page that shows the alterations to your policy.

    If you dont receive a new one within a week after the change, call your insurance company:

    • Confirm the policy changes were made
    • Request that your carrier send you a new declarations page showing the changes

    “It’s imperative that this page be reviewed at each renewal to ensure everything is accurate and the basic details have not changed,” warns Paul Dreher with Lawley Insurance in Buffalo, New York.

    Learn How To Read Your Policy

    Homeowners – How to read policy Declarations

    To ensure you have the right amount of coverage, review your home inventory with your agent. Putting in the extra work before you purchase your policy protects you against being underinsured. Unfortunately, most people only find out they dont have enough coverage after disaster strikes. Become familiar with what each section of your policy covers so that you can refer to it if you need to make a claim.

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    Its All About You We Want To Help You Make The Right Coverage Choices

    Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance provider and cannot guarantee quotes from any single provider. Our insurance industry partnerships dont influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

    Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.

    Admit it. Youve probably never read your homeowners insurance policy. It happens all the time. Homeowners assume their insurance agent has them covered. Its their job to take care of you and make sure you have the right insurance. Unfortunately, many policies are designed with a template. So every insured gets the same basic policy which doesnt always make sense. More importantly, its not uncommon for homeowners to choose policies based solely on something like price without understanding all the differences. So lets take a minute or two to break it all down.

    There is, of course, much more detail in the fine print, but we are taking a 35,000-foot view here because its not exactly riveting stuff.

    Homeowners Insurance Coverage And Policy Limits

    Your declarations page will list each of the coverages that youâre paying for to protect your home and financial wellbeing. The dec page will also show the coverage limit, or limit of liability, for each component of coverage. Your limit of liability is the maximum amount the insurance company will pay out in any one claim. If you have $300,000 in dwelling coverage, then 300,000 is the maximum the company will pay you for damages to the structure of your home.

    Your coverage will likely be broken up into three sections: property, liability, and additional coverage.

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    What Isn’t Covered By Homeowners Insurance

    While homeowner’s insurance covers most scenarios where a loss could occur, some events are typically excluded from policies, such as natural disasters or other “acts of God,” and acts of war.

    What if you live in a flood or hurricane area? Or an area with a history of earthquakes? You’ll want riders for these or an extra policy for earthquake insurance or flood insurance. Theres also sewer and drain backup coverage you can add on, and even identity recovery coverage that reimburses you for expenses related to being a victim of identity theft.

    Scheduling Your Insurance Inspectors Visit

    Texas

    Insurance companies generally send out an inspector before your coverage starts or within the first month of coverage. The inspectors job is to identify potential risks that could cause you to file a claim in the future. Inspections can also help you be eligible for certain discounts. The provider will generally contact you to schedule a visit so you can be home to let the inspector in, but inspections can also happen without warning. Inspections usually take a few minutes to a few hours depending on how big your property is.

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