Property taxes are due soon! So consider this time of year a gentle nudge to do an annual check-in on how your home fits into the larger picture.
As a homeowner, taking time to understand what your Homeowners Insurance actually covers is really important. And it allows you to make adjustments if needed.
Reviewing it annually is a good exercise to make sure you maintain an appropriate level of insurance. And it’s also a good check-in point to ensure you’re being intentional about how the property supports your other financial goals.
For example, if you are going on a sabbatical soon, how does your home impact your travel goal?
- Monthly cash flow impacts your savings, which could impact the timing or type of sabbatical! Know what coverage you’re paying for
- What will you do with your home when you leave on sabbatical? Keep it, rent it out, sell it – if you keep it or rent it out, you still need to keep (and pay for!) insurance coverage
- Knowing what perils your insurance will cover will help you know how much to have in an emergency fund if something happens while you are away. And it can help you avoid a not-so-fun surprise bill
Here are 7 things you need to know to better understand your Homeowners Insurance Policy:
1. Understand each section of homeowners policies
Each homeowner policy has standard sections. Take time to understand each section and know what you have (or what you should have).
- Coverage A – Dwelling (this section covers the house, of course, and attached structures and fixtures)
- Coverage B – Other Structures (think detached garage, workshop, fences, swimming pool, etc.)
- Coverage C – Personal Property (this section has limits for certain types of property, separate policies can protect belongings above the listed limits)
- Coverage D – Loss of Use (it helps you cover the cost to live somewhere else if your house is not livable)
- Coverage E – Personal Liability (this section comes into play if you’re liable due to negligence – for example if your dog bites the mailman or someone slips on your driveway; it has some limits though)
- Coverage F – Medical Payments to Others (this section pays medical bills for people hurt on your property or by your pets, it doesn’t have to be due to your negligence)
2. Understand the limits and deductibles of each section
The next step is to understand the limits and deductibles of each section. This can help you avoid having some unpleasant surprises.
For each section in point 1, your policy will have different types of coverage:
- Basic – Only covers named perils (e.g. fire, hail, wind, theft – check your specific policy for details)
- Broad – Basic coverage plus a few more perils
- Open – Comprehensive coverage, covers everything except specific exclusions
3. Understand the value you’ll receive
You also want to make sure to understand if the coverage will pay Replacement Cost or Actual Cash Value. It may not cover the full cost to replace, so again you’ll want to be aware of what definition your policy is using to avoid unnecessary disappointment.
4. Scheduled Personal Property Policy – Do you need to add it?
Consider whether you have any belongings that might require additional coverage above the stated limit on your policy. If so, you may want to get a Scheduled Personal Property Policy. For example, for wedding rings, camera gear, tools, art collection, etc.
5. Know what things are not covered
Some things cannot be covered by your Homeowners Insurance policy, such as:
- Intentional loss
- Things covered by other insurance policies (consider a separate policy if any of these apply to you):
- Business losses/liability
- Cars, boats, planes
- Flood
- Earthquake
6. Consider Umbrella Insurance
Umbrella insurance adds additional liability coverage on top of Homeowner’s Insurance limits.
To learn more, go to content.NAIC.org
7. Regularly review your policy
As your home value increases, it’s good to review your coverage limits to ensure they’re keeping up. Start by looking at the value of the dwelling and other items listed in the policy.
We know insurance policies can be dense and overwhelming. But they don’t have to be! Spending some time to understand what you are actually paying for will help you make smarter choices and feel more empowered!
Once you understand your current insurance coverage, you can make the adjustments that make sense FOR YOU! No unpleasant surprises – just calculated risks!
What if you don’t own your home? You may want to consider renters insurance that can provide protection against loss for you.
Do you need help reviewing how your home fits into your sabbatical plan? Contact us today!
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This blog post is provided for educational, general information, and illustration purposes only.Opinions expressed herein are solely those of Middleton & Company, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness.
Nothing contained in the material constitutes financial or tax advice, a recommendation for purchase or sale of any security, or investment advisory services. We encourageyou to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Middleton & Company, and all rights are reserved.
