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Home Insurance Frequently Asked Questions

Many policyholders don’t ask questions or don’t ask the right questions when purchasing a home insurance policy. Some only ask questions after they have made a claim for damages that were not covered by their home insurance. That is the worst time to find out that something will not be covered; it can in fact be devastating. These are commonly asked questions which will help homeowners to better understand the coverage provided by their home policy.

How Much Will it Cost?

Home insurance premiums are determined on a case by case basis and consider factors like the location of the home, the proximity to fire services and water sources, and the age and condition of the home. Homes located in an areas prone to wild fires, tornadoes, hurricanes, and other types of disasters will have higher insurance costs than those in areas where such occurrences are rare. Areas with high crime rates also have higher insurance rates since policyholders are more likely to make claims.

What does my Insurance Cover?

As a rule, home insurance policies cover the home and contents up to the pre-determined limit of the policy. There are two types of coverage, replacement cost and actual cash value.  A replacement cost policy pays for the cost to replace an item or rebuild a home, but an actual cash value policy pays the market value of the item claimed, which includes depreciation or value lost over time. On older homes, the cost to rebuild may exceed the value of the home and a replacement cost policy may be best.

Will my Home Insurance Pay for Earthquake or Flood Damage?

Most home insurance policies exclude damage caused by earthquakes or floods. The U.S. government offers flood insurance for homes and it may be possible to purchase a separate policy to cover earthquake damage. Damage caused by wind or rain is covered by home policies, but damage caused by storm surges during a hurricane is considered flood damage.  As a result, it is excluded, so those living in areas prone to hurricanes should also carry a flood policy.

How do I Know What is Covered?

There are two types of home insurance policies, specified perils and broad forms. In a specified perils policy, only those risks that are listed on the policy, like fire, are covered. Conversely, a broad form policy covers all risks not specifically excluded under the policy; common exclusions are damages caused by acts of war, public riot or civil unrest, floods, earthquakes, and nuclear accidents. The best way to know exactly what is covered is to read the policy or ask an insurance company representative.

Will Making a Claim Raise my Insurance Premiums?

Whether a claim will raise home insurance rates depends on the type of claim and the possibility that similar claims will be made in the future. Although many states have laws which prevent insurers from canceling coverage because a claim was presented, in some areas the insurer may cancel the policy. There are regulations which may limit an insurers’ right to raise premiums following a claim.  Again, the best way to find out about rate raises is to consult a local insurance specialist.

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