- Most homeowner's insurance policies contain a coverage limit for the repair or rebuilding of the home. For instance, if you have a dwelling limit of $400,000 in your policy, that is the maximum amount the insurance company will pay to rebuild or repair your home. It is your responsibility to pay the costs that exceed the policy limit. To protect yourself against this, look for an insurance policy that provides guaranteed replacement cost coverage for your dwelling. If your home sustains major damage from a fire or other covered loss, guaranteed replacement cost coverage ensures that you have enough money to rebuild your home.
- If you cannot afford guaranteed replacement coverage, look for a policy that includes code upgrade coverage. Most homeowner's insurance policies only provide coverage for you to repair or rebuild your home exactly as it was before the loss. If building codes changed in your area since the original construction of your home, you may have to build the home differently or use different materials. Your insurance company will only pay for the cost of the code upgrades if you have that coverage included with your policy.
- Like the dwelling limits of most insurance policies, the most an insurance company will pay for the theft, damage or destruction to your personal property is the coverage limit. However, even if the loss of your personal property is less than the coverage limit, you still may not receive full compensation. Most insurance policies contain separate limits, commonly referred to as sub-limits, for expensive items such as artwork and precious metals. If you own a large amount of valuable items, such as jewelry, look for an insurance policy that allows you to separately list each of those items and insure them for their full value.
- Most automobile and homeowner's insurance policies exclude coverage for personal property stolen from your automobile. If you keep a lot of your personal items in your vehicle, look for a homeowner's policy that covers the theft of your belongings outside of your home. In addition to covering property stolen from your vehicle, this type of coverage usually provides coverage to items stolen while you are traveling.
- According to the National Insurance Flood Program, approximately 2 inches of flooding in a 2,000 square foot home would cause approximately $21,000 in damage. Most homeowner's insurance policies exclude coverage from flood damage. To protect your home from flood damage, consider purchasing a flood insurance policy from the National Flood Insurance Program.
