8 Types of Home Insurance You Didn’t Know You Needed
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Your home is one of the biggest investments you’ll ever make, so it’s smart to ensure you can repair or rebuild it after a disaster. But do you really know what’s covered under your home insurance policy? While most basic homeowner's policies provide coverage for the dwelling, contents, and other structures on your property, they don’t routinely cover every type of loss.
“Many homeowners are not aware that they don’t have some types of coverage until after a disaster,” says Andrew N. Mais, commissioner of the Connecticut Insurance Department and president of the National Association of Insurance Commissioners. “For example, homeowners’ policies do not cover flood damage, which many people are not aware of until it’s too late.”
In fact, many types of losses that you probably assume are covered are not— unless you’ve specifically added coverage and paid an additional premium. “Many types of coverage require a ‘rider’ or ‘endorsement’ added to your basic homeowner’s policy,” says Mais. Every policy is different, but these riders also may have a separate deductible and limits that apply.
Costs for adding coverage vary depending on the type, but they range from a flat fee to a percentage of an item's value. For example, a sewage backup endorsement may run $30 to $160 per year, while jewelry insurance typically costs one to two percent of the value of the jewelry.
Here’s what to do to ensure you have the appropriate coverage to protect your home, family, and valuable assets.
Read Your Policy
While it's not exactly thrilling to read, it’s essential to know your specific coverage and limits. “Reading an insurance policy is boring but necessary,” says Mais. “It’s much better to do it now than when it’s too late. Ask questions so you understand exactly what is covered or not.”
Do an Annual Review
Just like your annual physical, it’s a good idea to review your insurance regularly. “With the increasing costs of homes, you should be checking your coverage every year,” says Mais. “It’s not only about what is covered, but do you have enough coverage?”
In fact, according to United Policyholders, a nonprofit consumer insurance resource, more than half of homeowners are underinsured, meaning they don’t have adequate coverage to replace or rebuild their homes after a loss. Your agent can help you navigate your coverage choices.
Keep Thorough Records
If you experience a total loss during a fire or natural disaster, chances are you won’t remember every single thing you own. Make a home inventory, going through each room and writing down items, or use a free app to keep track, says Mais. Take photos and videos, too, and keep receipts for big-ticket items. Store the inventory online or in a safe deposit box. This record-keeping will make filing a claim, if need be, more efficient.
Understand the Different Types of Riders and Endorsements
The following types of coverage typically are not included as part of a basic homeowner’s policy and require separate riders or policies, says Mais.
Full Replacement Coverage
You can insure your home and its contents at full replacement cost or actual cash value. Full replacement coverage is more expensive but does what it implies: It covers the cost to rebuild your home or repair damages completely. Actual cost value takes into account depreciation and thus only pays based on the age and wear and tear of your home—meaning it generally won’t pay enough to fully repair damage or replace your home.
Flood Coverage
Homeowner’s policies do not cover flood damage; depending on where you live, you may qualify for flood insurance through the National Flood Insurance Program. If your home is in a flood plain, your mortgage lender may require you to buy flood insurance. “But even if your bank doesn’t require it, you may wish to explore your options,” says Mais.
Earthquake Coverage
Damage caused by earthquakes is not covered under a basic policy. Many insurance companies sell it as a separate policy or endorsement for your policy.
Windstorm and Hail Coverage
Policies in coastal areas often exclude this coverage, so you’ll need to buy a separate policy.
Sump Pump Overflow or Sewer Backup Coverage
Many homeowners don’t realize if a sump pump overflows or sewage backs up, it’s not covered. “It’s a low-frequency event, but damages can be high,” says Mais.
Jewelry Coverage
A scheduled personal property endorsement (or personal articles floater) covers jewelry, such as an engagement ring, and other items, such as fine art, which have a value greater than the normal limits in your homeowner's policy. With this coverage, scheduled items generally also are covered if lost or stolen, says Mais.
Electronics Coverage
Electronics, such as your computer and TV, may not fall under your homeowner’s policy. A separate rider may allow you to increase policy limits if you have a lot of electronics.
Additional Coverages for High-Value Items
If you have other items of high value, such as collectibles, antiques, or musical instruments, read your policy or talk to your agent about whether or not it is covered and how to add coverage. “Everyone’s situation is different and not all policies are the same. But it’s worth understanding your risk and coverages in order to protect your home and family,” says Mais.
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