Your homeowners insurance policy is designed to help protect one of your most important investments but understanding what that policy covers can be just as important as having coverage in place.
Check out our guide below for proactive steps to take to protect your home.
Questions? Reach out to one of our knowledgeable insurance agents. We’re eager to set you up with the right coverage and rate!
From flood damage and deductibles to home renovations and valuable belongings, there are several areas of homeowners insurance that are commonly misunderstood. To help clarify some of these questions, we spoke with Chris Walton, Agency Manager at Cornerstone Insurance Agency, about what homeowners should know about their coverage before they need to use it.
Q: What is one thing homeowners often misunderstand about their homeowners insurance coverage?
Chris: One of the most common misconceptions is that a homeowners insurance policy covers every type of loss. In reality, policies are designed to cover specific types of losses, such as wind, hail, or fire.
Depending on the risks you face, additional coverage or separate policies may be needed to provide the protection you’re looking for. That’s why it’s important to understand what your policy covers and whether additional coverage may be appropriate for your home and situation.
Q: What are some types of damage or situations that homeowners commonly assume are covered but may not be?
Chris: Flood damage is one of the most common examples. Many homeowners assume flooding is covered under a standard homeowners policy, but flood insurance is generally a separate policy.
Understanding your property’s flood zone and the risks associated with where you live can help you determine whether you may need separate flood coverage. If you’re unsure, talk with your insurance agent about the risks specific to your area and what coverage options may be available.
Q: How can homeowners tell whether their policy provides enough coverage to rebuild their home after a major loss?
Chris: The best approach is to sit down with your insurance agent and review how your home has changed since the policy was originally written. Have you made any additions? Finished a basement? Added a room? Upgraded the kitchen or bathrooms?
Your agent should know about these changes so the policy can reflect the home you have today. It’s also a good idea to review your coverage at least every other year, if not annually, to help ensure you have enough coverage to rebuild your home in the event of a total loss.
Q: What is the difference between a home’s market value and the amount it may cost to rebuild it, and why does that distinction matter for insurance?
Chris: Market value is what you could buy or sell your home for, and it can be influenced by factors such as location, the neighborhood, school district, or whether the property has features such as a golf course view.
Insurance focuses primarily on the structure of the home and what it would cost to rebuild it, rather than the value of the location itself. In many cases, the cost to rebuild may be different from the home’s market value. Depending on your situation, endorsements or additional coverage may be available to address specific coverage needs.
Q: Are there certain personal belongings, such as jewelry, electronics, collectibles, or other valuables that may have special coverage limits?
Chris: Yes. Items such as jewelry, artwork, electronics, and other valuable personal belongings may have specific sublimit under a standard homeowners policy. This means coverage for certain items may be limited to a set amount.
For example, jewelry may have a coverage limit of $1,500 or $2,500, depending on the insurance carrier and policy. If you own valuable jewelry, artwork, or other high-value items, you may want to consider endorsing your homeowners policy or obtaining separate coverage designed specifically for those items.
Q: How do deductibles work, and what should homeowners understand about their deductibles before they ever need to file a claim?
Chris: One of the most important things to understand is how your deductible compares with the potential cost of a repair. Before filing a claim, homeowners should understand their deductible and, when appropriate, obtain estimates to determine the anticipated cost of the damage.
For example, if you have a $5,000 deductible and a covered water damage claim costs $8,000 to repair, you would be responsible for the first $5,000 and insurance would cover the remaining $3,000, subject to the terms of your policy.
On the other hand, if a covered roof claim costs $30,000 and you have a $5,000 deductible, you would be responsible for the $5,000 deductible and the policy would cover the remaining $25,000, subject to the policy terms and applicable coverage limits.
The key is understanding your deductible and how it relates to the potential cost of a loss before you need to use your coverage.
Q: What changes to a home or a homeowner’s life should prompt them to review or update their insurance policy?
Chris: Homeowners should review their insurance coverage regularly, especially after making renovations or significant changes to their home.
Adding a second floor, building a room above a garage, remodeling a kitchen, or making other major improvements can change the value and replacement cost of the home. It’s important to let your insurance agent know about these changes so your coverage can be reviewed and updated as needed.
For example, if you invest in a major kitchen remodel, you’ll want to make sure the improvements are properly accounted for in your insurance coverage in case the home is damaged before you have a chance to sell it.
Q: If you could give homeowners one piece of advice about understanding their insurance coverage before they need it, what would it be?
Chris: Don’t wait until a claim happens to understand your insurance coverage.
Insurance is something we pay for but often don’t think about because we may not interact with our policy on a regular basis. Take the time to understand the basics of your homeowners policy and how it would respond to situations that are relevant to where you live.
For example, Florida homeowners should understand how their coverage may respond to risks such as hurricanes and flooding. Sitting down with your insurance agent and asking questions before a major weather event or other loss can help you better understand your coverage and make informed decisions as a homeowner.
Know Your Coverage Before You Need It
Understanding your homeowners insurance can help you identify potential gaps, prepare for unexpected expenses, and make more informed decisions about protecting your home and belongings.
Have questions about your homeowners insurance coverage? Our Cornerstone Insurance Agency team is here to help you understand your options and find coverage that fits your needs.
This article is for informational purposes only. You should not act based on this information without first consulting with your insurance agent; if you would like a quote from a Cornerstone Insurance Agency licensed agent, contact us. We disclaim all liability for actions taken or not taken by you based on the contents of this article which is provided “as is.” Cornerstone makes no representation that this content is error-free.