Don’t overlook your home coverages.

Most homeowners insurance policies don’t automatically include coverage for damage caused to your home (usually your basement) due to sewage backing up or rainwater that floods in due to the failure of your sump pump. If you have a finished basement, this coverage may be especially important. Even without a finished basement, you could have damage to your furnace, water heater, or water softener and this coverage would apply.

Identity theft is the fastest growing crime in America. Most identities are stolen the same way. Someone will take your personal information and open a credit card, many times with just a very small limit. They make a few payments on this card and establish “good credit.” Soon after, other credit cards are opened and loans are secured…all in your name, but at their address (usually a PO Box). The cards are usually maxed out and the loans are never repaid. Collection letters are mailed and your credit rating plummets. You won’t learn that this has happened until you apply for a legitimate loan or a credit card. Most homeowners policies offer Identity Theft coverage, but it’s an endorsement that must be added for an additional charge.

Every home insurance policy places a limitation on jewelry. Most policies only include $1,000 of coverage, and they don’t cover the most common type of loss – mysterious disappearance (stone falling out of ring, for example). Listing your jewelry items individually is the best way to ensure that your items are insured properly. You will have All Risk Coverage on the item and it will be insured up to the dollar amount that you have listed.

Every home policy has a special limitation on collectibles such as coins, stamps and baseball cards. Some collectibles are covered up the limit of your personal property coverage, but some are not. Listing your collectibles separately may be a good idea. This is the only way to obtain a limit of coverage beyond the basic policy limit. Also, the coverage may be modified to include All Risk Coverage, which would cover breakage, mysterious disappearance, and some other perils not normally covered under personal property.

Most companies have changed their homeowners insurance to place a cap on the replacement cost limit of your policy. Previously, if your home was insured for $150,000, but after a fire you learned that it would take $250,000 to rebuild, the company would be obligated to pay the full $250,000. This was called Guaranteed Replacement Cost. Most policies now place a cap of 20-25% on the dwelling. For example, if your cap is 25% and your home is insured for $150,000, the most they would pay is $200,000 to rebuild an identical dwelling. After a disaster, such as a devastating hurricane, lumber prices almost always skyrocket. If you have a claim shortly thereafter, your insurance company could easily pay 25% more to build your home due to the shortage of building materials. It’s important to make certain that your home is always insured to 100% of the cost of rebuilding an identical home. If you have plaster walls or oak floors, the company is obligated to pay for plaster walls and oak floors. Replacement cost, not market value (what you could sell your home for) is the benchmark used to insure your dwelling.

What are some things not covered by homeowners insurance? Virtually every policy contains an exclusion for:

  • War
  • Earthquake
  • Nuclear Reaction
  • Wear, Rot, Tear & Deterioration
  • Birds, Vermin, Insects, Animals
  • Earthquake coverage can be added for an additional premium, but insuring against the other items might be difficult.

Your policy will also contain other exclusions and you should review it carefully to ensure that there are no surprises after a claim.

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