Just like auto insurance is required if you have a car, homeowner's insurance is required if you have a mortgage on your home. Even for those who are fortunate enough to have a paid-for home, not having homeowner's insurance is a huge risk most people aren't willing to take. The two basic risks to consider are damage to the property and liability from an injury on the property.
Most homeowner policies are written as a package and many companies offer common coverages. There are however, subtle differences in the policies that can leave a homeowner paying significant expenses out of pocket. As the saying goes, "things that are different are not the same".
Some changes that are currently being found in policies offered by the major carriers create a need for discussion:
Roof Endorsements - The major carriers are now inserting an endorsement in their policies that are similar to the coffee companies who are shrinking their packaging rather than increasing their prices. The roof endorsement will affect homeowners with roofs older than ten years. Many insurance companies have quietly introduced an endorsement that allows them to pay "actual cash value" rather than "replacement cost" for a roof damaged by wind or hail. What that means to the homeowner is; instead of getting paid for the cost of a new roof that has been damaged by wind or hail, they will be paid the cost of a roof that has been depreciated for the year of its age. This can lead to huge out of pocket expenses for the homeowner.
Sub-Limits - Almost all insurance policies pay for reimbursement of personal effects. There are however, sub-limits for things like antiques, jewelry, gun collections and fine art. Unless the homeowner specifically schedules these types of contents on their policies, the sub-limits (in most cases about $3,000) will apply. Not every agent will be thoughtful enough to ask the right questions, so the homeowner should be aware.
Deductibles - Almost every insurance company now offers a separate deductible for wind and hail damage. The deductible is usually a percentage of the dwelling coverage. Therefore, if your wind/hail deductible is 1% (seems nominal) and your home is insured for $350,000, you will be paying $3,500 out of pocket before you receive any reimbursement from your company.
The best advice is to know what questions to ask, and then ask the right questions.
Here's an article about health insurance comparisons.
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