Your homeowner's insurance shields you from various losses, but the protection might fall short of your expectations if you don't prepare for it. Below are a few tips to increase the chance of full compensation in case of a loss.
Insure the Home at the Correct Value
Your home insurance covers your home and its contents up to a specific limit. Ideally, the limit should be enough to replace your entire home and its contents in case of damage. Such full coverage is only possible if you insure your home at its correct value.
For one, you should know how much you would need to replace the home in case of total damage. Material costs, local labor charges, and building codes affect the replacement cost. Use purchase receipts and appraisal reports to ensure you get the correct value for your home's contents.
Add Riders for Excluded Risks
The HO-3 is the most popular home insurance schedule. The schedule is comprehensive, but it doesn't cover every threat to your home. For example, HO-3 excludes flood or earthquake damage. Thus, your HO-3 policy might not replace your home after flood damage.
Fortunately, many insurance companies offer additional coverage for risks that the standard schedules do not cover. Evaluate your home's threat and buy additional coverage
Get Guaranteed Replacement Cost Coverage
Even if you appraise your home and its contents properly, they might suffer damage that exceeds the insurance offer. For example, you might purchase a $250,000 policy only to learn that you need $300,000 to rebuild your home after storm damage. In such a case, the policy determines how much your home insurance company pays for the damage.
For example, the insurance company will pay for the damage minus the home's depreciation up to the policy limit. On the other hand, if you have replacement cost coverage, the insurance company will pay to rebuild the home even if the rebuilding cost exceeds the polity limit.
Respect Coverage Terms and Conditions
Lastly, read your insurance company's terms and conditions and respect them. For example, many insurance companies specify how long your policy stays valid if your home is vacant. You might not get full compensation for losses that arise after the grace period. That knowledge may help you get the right coverage and compensation in case of a prolonged home vacancy.
Review your home insurance coverage to confirm that you have adequate coverage. If your coverage is inadequate, consult an insurance agent to help your insurance coverage for better protection.