As a homeowner, it’s crucial to understand the home insurance that protects your dwelling. Your mortgage lender will likely require you to carry some level of coverage, but don’t rely on the most basic coverage, as you will want to make sure it protects you from financial disaster.
If you’re just now making the journey into homeownership, you may be feeling overwhelmed by all of the options you have and all of the details listed in your policy. In this article, we’re going to break down some of the terms that you’re likely to encounter when shopping for home insurance and explain what they’ll mean for you and your home.
Liability insurance covers you for visitor injuries on your property. Liability insurance covers legal settlements and legal fees. Excess liability or an umbrella policy is available for coverage of $1 million beyond your home insurance. You never want to jeopardize keeping your home because you failed to purchase an insurance policy. Medical payments also help to pay for guests who are injured in your home, and you should know the difference between medical payments and liability insurance.
Personal property coverage covers the property within your home, including:
You can choose replacement value or actual cash value for your personal property. Reimbursement value reimburses you the full amount to replace items if they are stolen or damaged; actual cash value reimburses you the amount the items are worth now after years of depreciation. Replacement value is more expensive than actual cash value. For expensive items, you may need a separate endorsement, which can include items like jewelry, fine art, guns, and sports memorabilia.
Additional Living Expenses
Additional living expense coverage covers you if your home is damaged and you have to live somewhere else while it’s repaired. This policy includes paying for hotel rooms and meals while you’re displaced. For instance, if a fire damages your home, you can make a claim by submitting paperwork documenting your living expenses.
One of the most common first-time homebuyer mistakes is confusing a house’s market value with its replacement cost. Your home insurance coverage should cover the cost of rebuilding your house. Going the replacement cost route is often less than what you paid for your home; if you’re insuring your house for its market value, you may be over-insuring it. Your New Jersey home insurance agent can help you calculate your home replacement or value. This typically can be done by using online tools.
Limits & Discounts
Read the exclusions section of your home insurance policy. Understanding what the insurance won’t cover is just as important as knowing what it will.
Avoid filing a claim for damage that your policy doesn’t cover because it will go onto your claims record and it leads to higher rates. You will also want to be aware of the discounts you can qualify for. Common discounts include:
- Bundling (also called multi-policy)
- Security system
- Automatic payment
Insurers use credit scores as a factor when determining home insurance rates as this is a reflection of an individual’s risk. In other words, insurers believe that people with poor credit are more apt to file claims. Make sure you stay on top of your credit score as a new home buyer or you’ll likely pay more for home insurance.
Deductible are what you must pay for repairs if your insurance company approves your claim. It’s your share of the repair cost. The higher the deductible, the lower the insurance premiums. Going with a higher deductible will save you money in the long run and reduce your home insurance claims. That’s why it’s important to be comfortable with your trade-off when choosing a home insurance deductible.
Flood & Earthquake Damage
One of the most common home insurance misconceptions is that it covers flood and earthquake damage coverage. You must purchase a separate policy for these. You will certainly want to review your home insurance in New Jersey to see what your specific coverage needs and wants are.
About Provident Protection Plus
At Provident Protection Plus, we have served the businesses and residents of New Jersey, New York, and Pennsylvania for more than 65 years. We are a wholly-owned subsidiary of Provident Bank, the region’s premier banking institution, and we are prepared to offer you personal, business, employee benefits, and risk management solutions. To learn more about our coverage options, contact our specialists today at (888) 990-0526.