10 Questions to Ask About Homeowner's Insurance

When shopping for a home insurance policy, it pays to ask questions to make sure the policy you’re going to get is one that’s right for your needs. The “right” home insurance policy doesn’t even necessarily mean it has to be the most affordable one available. Your coverage has to match your needs, and that could cost more.

In any case, here are 10 questions you need to ask agents and insurance experts you might know before buying homeowners insurance.

1. What is home insurance?

In all likelihood, you already know that home insurance is a type of property insurance that provides financial protection in the event your home and its contents are damaged or lost during a disaster.

Then again, you might want to have a better and deeper understanding of everything that comes with having home insurance. If that is the case, then pose this question to agents, and they will be more than glad to expound on the subject.

2. What perils does a homeowners insurance policy typically cover?

A basic homeowners insurance policy only covers loss and damages caused by the following:

• Fire
• Smoke
• Windstorms
• Lightning
• Hail
• Explosion
• Vandalism
• Theft

3. Will my home insurance policy cover flooding and earthquakes?

Like all insurance policies, a standard homeowners insurance policy has its limits. While it covers several perils, it draws the line at damage or loss caused by flooding and earthquakes.

If your home is located in a flood-prone area, you might want to consider getting a separate flood or earthquake insurance coverage.

Home insurance also does not cover intentional damage or loss, as well as those caused by neglect, power failure, war, and nuclear explosion.

4. What about water damage?

A standard home insurance policy may cover water damage, but it depends on several factors. Sudden and accidental water damage caused by a ruptured water heater or a burst upstairs pipe is covered. Water damage caused by water backing into your home through an outside sewer or drain is not. The same goes for water damage due to flooding after a heavy storm.

5. Can I opt for more coverage?

If you think that the basic home insurance policy does not match your needs, then you can always opt to purchase a higher level of coverage or buy add-ons. Of course, it means higher premium payments, so be ready for that part, too.

6. Will my policy compensate me for actual cash value or replacement cost?

As long as the damage or loss is due to any of the covered perils, your home insurance will compensate you. Whether or not you’re compensated for actual cash value or replacement cost will depend on your policy’s terms, though.

In case of damage, you’re only required to pay for the deductible out-of-pocket if you have a replacement cost policy. An actual cash value policy, however, means you’ll have to pay for more than just the deductible.

7. What is liability coverage?

One of the most notable things about home insurance policies is that they also provide liability coverage. Your homeowners insurance policy will protect you in case someone suffers an accidental injury on your property and sues you. It also covers any damage a member of your family causes to a neighbor, like a baseball through the glass window of the house next door.

8. How much liability coverage should I get?

Typical liability coverage in a standard home insurance policy is usually pegged at US$100,000. However, considering the legal and medical costs that a personal injury claim or suit may bring, you might want to get more coverage.

9. How about personal property coverage?

An inventory of your belongings should give you a good idea of how much personal property coverage you need. You can also base your personal property coverage on your dwelling protection, as most providers offer personal property insurance equal to 50% - 70% of the latter.

10. What is an ALE?

ALE stands for additional living expense, which will come in handy if the severe damage to your home forces you to stay somewhere else. The hotel bills, meals, and other expenses of you and your family will be paid for by the ALE provision of your home insurance.

These are just some of the questions you must ask agents before making a final decision on the homeowners insurance policy to purchase. As much as possible, talk to more than one agent about your home insurance concerns, so you can make comparisons and get the coverage you need at the best possible value.