Do you know what your home fire insurance policy limits are? Often, homeowners will take out a basic home insurance policy and quickly forget about the details that will become crucial in the event that you are faced with a loss and having to make a claim.
After a few years, the details of your policy can wind up out-of-date, exposing you to unnecessary risks. It may be time to review your coverage to make sure it fits your family. This is what you need to know about fire insurance and your policy.
Coverage Limits
Updating your coverage limits may be one of the most important things you can do for your own financial security. Your coverage limit is the maximum amount of money your insurance will provide in the event of a total loss.
One of the areas where your coverage limit can easily fall short is Structural coverage. The cost of construction has risen even faster than inflation in recent years. In some places, they have risen more than 50% since 2019.
For many homeowners, that means they simply will not receive enough insurance coverage to completely rebuild their homes after a total loss.
Deductibles
When was the last time you checked the deductible on your policy? This is the amount you need to pay before insurance will pick up the bill.
When you review your insurance policy, double-check your deductibles and adjust them to reflect your savings and your current needs.
After buying a home, many people find themselves strapped for savings, and they may opt for a higher deductible to keep the premium lower. If you have had a chance to increase your savings to a more comfortable level, you can consider saving money by reducing your deductible and paying a marginally higher premium.
Upkeep: Why Negligence Can Lead to a Rejected Claim
As a homeowner, you face a lot of maintenance costs, and there may be more that you need to worry about than you expected. While some smaller tasks like filling in cracks in the exterior need to be done annually, there are also major tasks like replacing your roof or the plumbing that you need to prepare for. By one estimate, annual maintenance and replacement costs can go anywhere from $4,500 to $10,000 per year.
Unfortunately, not only will your home insurance not pay for regular upkeep, but failure to keep up with basic maintenance can lead to your claim getting denied.
Unless you take the proper steps to avoid damage to your home, you can wind up getting no help from your insurance company when an actual loss occurs from an insured peril.
Actual Cash Value vs. Replacement Cost
The type of insurance you have will matter a great deal as well. The important difference between actual cash value and replacement cost is how much money you should receive according to your policy. When you have a replacement cost policy, you should receive enough funds to replace all of the lost belongings and repair your home.
If you have an actual cash value policy, the funds you receive will match the value of those belongings and materials at the time of loss, i.e., with depreciation factored in. Often, insurance companies will apply high rates of depreciation and leave you out of pocket substantially to replace your damaged items.
These are the main factors to consider when you review your home fire insurance. You may also want to look at exclusions in your policy that could prevent you from receiving a settlement for certain losses, but this is an excellent place to start.
