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6 Things to
Understand About Homeowners Insurance
1.
Look for exclusions to
coverage. For example, most insurance
policies do not cover flood or earthquake damage as a standard item. These
coverages must be bought separately. Coverage for back-up water damage and extra
coverage for computers and electronics should be considered.
2.
Look for dollar
limitations on claims. Even if you are covered for a
risk, there may a limit on how much the insurer will pay. For example, many
policies limit the amount paid for stolen jewelry unless items are insured
separately.
3.
Understand replacement
cost. If your home is destroyed you’ll
receive money to replace it only to the maximum of your coverage, so be sure
your insurance is sufficient. This means that if your home is insured for
$150,000 and it costs $180,000 to replace it, you’ll only receive $150,000.
4.
Understand actual cash
value. If you choose not to replace
your home when it’s destroyed, you’ll receive replacement cost, less
depreciation. This is called actual cash value.
5.
Understand
liability. Generally your homeowners
insurance covers you for accidents that happen to other people on your property,
including medical care, court costs, and awards by the court. However, there is
usually an upper limit to the amount of coverage provided. Be sure that it’s
sufficient if you have significant assets.
6.
Understanding lender requirements. Homeowners insurance is required by your
lender. Flood insurance will also
be required if the home is located in a flood area. Homeowners insurance is not the same as
a Home Warranty policy. Homeowners
insurance is also not the same as title insurance. A lender’s title insurance policy will
be required by your lender (this is a one time cost at closing which covers only
the amount of the mortgage in the event of a title issue). An owner’s policy is also available at
closing. Although owner’s policies
are not customary in our market, the closing company can discuss the pros and
cons of an owner’s title policy.
Reprinted from REALTORÒ
Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORSÒ.
Copyright 2005. All rights reserved. Amendments and additional
information provided by Liz Maule.
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