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The Importance of Knowing Your Home Coverage

If you own a home do you actually know what your policy covers? There are pages and pages in your renewal packet that comes every year but you probably throw it away. Most people’s biggest asset is their house yet most are unaware of what it is actually covering. While it may never be an issue, some people have lost thousands of dollars for not fully knowing what their policy entailed and by then it was too late. I want to take a moment to go over some of the things that can vary from policy to policy. Homeowners generally know what their home is insured for and what the price is but there is a whole lot in between. Did you know that not all policies will replace your roof if it is damaged? How about that your jewelry may not be covered at all? Because each company is so different, each policy is very different and some are much better than others.

When you are looking for homeowner’s insurance there are a few things that are a MUST HAVE for almost every homeowner. The first one is RCV (replacement cost value). If you have RCV on your policy this means that if your roof is damaged from a hail storm and deemed a total loss, they are going to pay you what it would cost to replace it less your deductible. If you do not have RCV you most likely have ACV (Actual Cash Value) which means they would pay you what it is worth at the time of the loss. For example, if you have a roof that was warranted for 25 years and it is 15 years old, that means that 60% of your roof life is gone. If you were to have a claim, they would only give you 40% of the value of your roof less the deductible. In some cases, the result could be thousands lost come claim time.

RCV is not something that is just limited to your roof, it is how they value all of your possessions as well. A good example to show how RCV is greatly different than ACV is a TV. Everyone knows that technology progresses at the speed of light and what’s hot today is a paperweight tomorrow. If you had a 5-year-old tv with ACV you would only get a fraction of what you paid for it because the value decreases so quickly. If you had RCV, you would get reimbursed for what it would cost to purchase that tv or one very similar brand new as of the time of loss!

Did you know that almost all policies have special limits for certain items? Jewelry, guns, furs and fine arts are the most common items with special limits. Most policies will give you a small amount for each of these on the base policy. Generally, this can be increased and floaters (a specified amount for 1 item) can be added to the policy so you are adequately covered. In some cases though, a policy may offer NO coverage for any of these items and while they may offer it, some policies may only cover you up to $1000 in total for each category!

Instead of writing 10 pages worth of explanations of how coverage can vary greatly between each policy I thought I would just make a list of each one so you can bring it up with your agent!

  • RCV

  • ACV

  • Earthquake

  • Flood

  • Sewer Backup

  • Special limits (Jewelry, guns, furs, fine arts)

  • theft/vandalism

  • pipe breaks

  • metal marring

  • Identity Theft

  • Building Ordinance

  • Reconstruction cost (too low because they use outdated estimators)

  • Personal Property at another location

  • power interruption

  • loss of use

  • separate structures

  • Watercraft/PWC coverage

Those are just a few of the different coverage options that can vary greatly from policy to policy. The easiest and most beneficial thing you can do to make sure that you are covered properly is by doing a review of all your policies with your insurance agent. To be honest with you, if they are not calling you every couple of years themselves, then you may want to rethink who your agent is because there are generally changes either on your policy or within your own life that need to be addressed to make sure you are properly protected.

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