Most people are not familiar with the details of their home insurance policy, and the only reason most people even purchase home insurance is because its required by their bank when they obtain a mortgage. Many people are not aware of the specifics in their policy until they have to file a claim.
Here is a little bit of information to test what you know so you can discover any common holes in your coverage:
Do I need flood insurance? Everyone should have flood insurance. There could be a flooding that can happen at anytime anywhere. A form of flooding occurs in almost every natural disaster. Most policies do not cover flooding however there is coverage available from the National Flood Insurance Program. The coverage takes 30 days to become active, so make sure you plan ahead to purchase flood insurance and not wait until a natural disaster occurs.
Am I covered if there is an overflow from the toilet, shower or sink? You will not be covered under flood insurance and in most cases you will not even be covered under your regular home insurance. Sometimes your current provider may offer additional protection for sewer backups called an endorsement. Any repair costs will come from the homeowner.
Will my home insurance cover any upgrades that any new building codes might require? No. Most policies will not cover for any upgrades to homes who have undamaged parts. However, your home insurance company might offer this protection at an additional price called ordinance coverage.
Will my policy cover the rebuilding of my home if its destroyed in a fire? This is a maybe. Almost all insurance companies will give you a specific amount that they will cover unless you have purchased optional or additional coverage. If you do not have additional coverage, then a specific amount would only be covered if you have had a total loss.
Most home insurance policies will cover for any loss of use costs or additional living expenses. This only plays in effect if you have to leave your home due to a disaster.
Will my homeowners coverage come up short in other areas? The best way to solve this is to obtain additional liability protection. Purchase an umbrella policy which will allow you to further your protection from any lawsuits that were a result of an injury. This way if anyone was to sue you, you wouldn’t have to pay out of your bank account. You would instead be covered, sometimes up to a million dollars.
Does my policy require any updating? Each year you should take another look at your homeowners policy. Any changes that you do to your home that are structural such as new windows, updating a bath room, etc should be relayed to your insurance agent so they can update your policy. Anything that would be valuable to you is worth a call to your insurance agent in order to protect those things.
To sum it up, if you do not like surprises, you have to be prepared for them. Read through your policy every year and contact your insurance agent in regards to flood insurance, etc. They may have a buy back protection available for you which could help layer up your policy with protection.