Reading Your Home Owner Insurance Policy

Whenever you receive the policy contract for your home owner insurance policy, the first thing you should do is sit down and review the policy very carefully. Your homeowner's policy contract is the definitive statement of what is and what is not covered under your homeowner’s insurance policy. Therefore, making sure that you review and understand the policy is essential. So, here is a guide to help you in reviewing the policy and to help you know which particular areas of the policy contract are the most important:

What You Will Need

A copy of our homeowner's insurance policy contract

Step 1 - Check What Is Covered

First, review your policy very carefully to ascertain what is actually covered under the policy. For example, make sure that all buildings on your proper property are covered. In addition to your home, if you have an external garage or workshop that contains valuable personal property, this should be covered in the policy as well. If it is not, make sure to contact your agent about revising the policy.

Step 2 - Check for Exclusions

This is one of the most important parts of reviewing your homeowner's insurance policy; in fact, you will probably find that there are a lot of reasons insurance companies will not pay the claim. When reviewing your homeowner’s insurance policy contract, make sure to check the exclusions. Exclusions in your insurance policy are simply circumstances or events that will enable the insurance company to avoid paying your claim. For example, standard homeowner’s insurance companies pay for fire damage - but many policies do not pay for smoke related damage or water damage from the firefighters putting out the fire with water cannons. Therefore always make sure that any included exclusions are sensible and acceptable to you.

Step 3 - Review Costing Procedures

When reviewing your homeowner's insurance policy, always make sure that you understand how your insurance company will value your building, personal belongings and the contents of your home – in the event that they are damaged, lost or stolen. Some companies use the actual replacement value as the basis for determining how much to pay for a claim. In short, this means that the insurance company will pay you an amount sufficient enough to buy the same item, or an equivalent as the one that was lost.

However, some insurance companies base the amount of claim payments on an actual cash value - minus any accrued depreciation. Therefore, the insurance company will pay you an amount that they feel is sufficient for your loss. For example if you have a two-year-old television that cost you $1000 when it was brand-new, the insurance company may only offer you $500 to replace it. Their reasoning is that it is second hand, and has experienced wear and tear; therefore, it is not invaluable as a new one. Therefore, always make sure that your policy includes replacement cost rather than actual cash value basis claims payments.

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