02/06/2024
Understand the details of your policy. Before you make a decision, understand these homeowners insurance terms:
Deductible – This refers to the amount you must pay out of pocket before your insurance kicks in; the higher the deductible, the lower the annual premium.
Liability Coverage – This is coverage that will pay medical or legal bills if someone is hurt on your property, usually due to negligence.
Personal Property – Sometimes called the contents of you home, this is tangible property such as furniture, electronics and clothing.
Premium – This is the price you pay for insurance, usually annually or monthly.
Replacement Cost – This is the kind of insurance that pays the full cost of replacing your dwelling or personal property, up to a maximum dollar amount. Most standard policies offer replacement cost, but you want to be sure the maximum amount is high enough.
Actual Cash Value – This type of policy gives you the current cash value (with depreciation) for personal property or your dwelling. It’s possible to have actual cash value dwelling coverage (as with an HO-8 policy), but to get replacement cost coverage for your contents.
Sub-Limits – Homeowners insurance policies will include limits, but they’ll typically also have sub-limits. For instance, the sub-limit on personal property for a $500,000 policy would typically be $250,000, or 50 percent of dwelling coverage.
Riders – These are policies you can include on your overall insurance policy to cover specific items. For instance, expensive antiques, jewelry and artworks are often covered under their own rider because they’re too valuable to be covered as regular personal property. Some HO-8 policyholders also may get additional riders for things like heating, ventilation and air-conditioning systems, which are part of the home and expensive to replace.
Be sure you understand how all of these terms work together in your homeowners insurance policy. Ask questions to ensure you have the right amount of coverage at the right price!
