What Makes a Great Home Insurance Policy

Home insurance is a necessity for any home with a mortgage. But just as every home is unique, insurance policies are not one-size-fits-all. How can you make sure that your policy includes what you’ll need to protect the people, property, and possessions you care about? You’ve got to read the policy or get a licensed insurance agent to. Here are some recommendations to help you understand your policy better.

Understand the Lingo

Understand these common industry-related terms that you’ll likely see in your policy:

• Damage, loss, and hazards — This is what most people think of when they hear “property insurance.” If a natural disaster, fire, or other calamity damages or destroys your home, you can make a claim against your policy and get reimbursed. Policy types vary, so be sure you understand which kind you have. Buying the right amount of coverage on your dwelling is essential. In fact, if you skimp on your home coverage, you could be charged a penalty (coinsurance clause) during a claim.
• Liability — Personal liability insurance can protect you financially if someone sues you for causing accidental injury or property damage, usually involving your home. Most liability insurance covers your legal fees and whatever you must pay if you are found “liable” or responsible for the injury or damage. UFCU recommends buying the maximum available from the insurer. If you are a dog owner, make sure incidents involving your dog’s breed are covered by your insurer. If not, or if your hobbies, property features, or home gatherings put you at higher risk for lawsuits, consider increasing your liability coverage or even buying an umbrella policy.
Contact us today to gain confidence about your current home insurance.
• Loss of use — Also called Coverage D or additional living expense, this coverage pays the cost difference you will have while in alternative housing if you cannot safely live in your home after a covered event. It covers the cost gap for staying in a hotel and eating in restaurants, for example, while you are in your temporary living arrangement. Become familiar with your policy to learn whether it covers pet boarding, a storage unit, laundry service, or other expenses that you might need, but that might be considered extras by your insurance company.
• Other structures — If your property includes structures other than your home, and if they are damaged or destroyed, Other Structures coverage can help pay for their repair or replacement. Examples of other structures are garage apartments, fences, sheds, gazebos, and detached garages. Your agent can complete a replacement-cost calculation for other structures. These items add up quickly, so rely on your agent to get the correct coverage. If you add a new structure to your property, review your coverage limits to make sure you have enough to reimburse you for its loss.
• Personal property — This coverage protects against loss of your household goods, furniture, and clothing, whether you store them in your home, shed, or garage. If you rent a storage unit, verify that your policy covers the items you store there (it usually will). If you also have firearms, expensive electronics, luxury goods, or special collections, look into dedicated insurance for this high-value personal property, because claim limits vary by policy for coverage for these items.
• Flooding — Did you know that your homeowners policy will not cover your home in the event of a flood that originates outside your home? For that, you need flood insurance. (However, if the flooding was caused by malfunctioning of a pipe or another system within your property, you likely have grounds to make a claim.) If you can afford it, consider purchasing flood insurance even if your property is not in a flood zone. An estimated 40% of homes that experienced flooding in recent years were not in areas considered to be at high risk for floods.
• Endorsements — You can modify, add, or limit coverage with insurance endorsements, or “riders.” Find out if you have coverage for events such as hail, water backup, water damage, seepage, foundation, replacement cost, increased cost of construction, inflation guard, and more. Get a licensed insurance agent to help you understand what you have and what’s available.

Know When to Review Your Policy

The time to acquaint yourself with your policy is now — before you need it. No one plans on experiencing damage to their home or facing a liability lawsuit.

Luckily, you’re not alone. UFCU’s wholly owned subsidiary, UFCU Insurance Services^®, can review your homeowners policy and suggest areas to supplement or safely reduce coverage. They can also help you find a policy that balances main and additional coverages within your budget. They’re available for a quick call whenever you make a large purchase or remodel that could change your coverage needs.

It’s a good idea to review your policy regularly — your financial health may depend on it.