5 Things to Understand About Homeowners Insurance

1. Look for exclusions to coverage. For example, most insurance policies
    do not cover flood or earthquake damage as a standard item. These
    coverages must be bought separately.

2. Look for dollar limitations on claims. Even if you are covered for a risk,
    there may a limit on how much the insurer will pay. For example, many
    policies limit the amount paid for stolen jewelry unless items are insured
    separately.

3. Understand replacement cost. If your home is destroyed you’ll receive
    money to replace it only to the maximum of your coverage, so be sure
    your insurance is sufficient. This means that if your home is insured for
    $150,000 and it costs $180,000 to replace it, you’ll only receive
    $150,000.

4. Understand actual cash value. If you choose not to replace your home
    when it’s destroyed, you’ll receive replacement cost, less depreciation.
    This is called actual cash value.

5. Understand liability. Generally your homeowners insurance covers you
    for accidents that happen to other people on your property, including
    medical care, court costs, and awards by the court. However, there is
    usually an upper limit to the amount of coverage provided. Be sure that
    it’s sufficient if you have significant assets.