Better Understanding Homeowners Insurance

It seems like our lives are so busy and hectic that we find it hard to learn about the important but basic things of homeownership such as insurance.  Homeowners insurance is one topic that easily gets overlooked, and we know very little about it.  We often leave all the details to the insurance agent without fully understanding them and then we hope that we never have to make a claim.  For most consumers, a home is the biggest investment we own, yet we underinsure them.  There is so much to learn about homeowners insurance.  It can be a tedious topic, but if we want to properly protect our assets we need to better understand it. 

There are many aspects of homeowners insurance.  Every new Pensacola, FL homebuyer should know these few basic tips because unfortunately, disasters seem to happen when we are least financially prepared for them.  Especially here along the Gulf of Mexico in Florida’s Panhandle, we have to protect our homes from the possibility of hurricanes which include wind and flood damage.  It is important for the new homebuyer to purchase enough insurance to cover the structure and personal possessions.  Also, it is a great idea to cover the cost of additional living expenses if your home is damaged and you have to find temporary housing until the repairs are completed.  Liability insurance is the last major part of homeowners insurance that the new homebuyer needs to purchase.

According to the Insurance Information Institute some mortgage lenders will require a new homebuyer to purchase homeowners insurance to cover the amount of the mortgage.  The new homebuyer should purchase enough insurance to cover the cost of rebuilding in the event of total loss.  Standard policies provide coverage for property loss from disasters due to fire, lightning, hail, explosions, and theft.  However, standard policies do not cover storm flooding or damage caused by the negligence of normal home maintenance.  Be sure to ask the insurance agent about wind damage coverage because it can vary.  Flood insurance is available through the National Flood Insurance Program (NFIP). 

The standard homeowners insurance policy can include optional coverage which the new homebuyer may want to consider.  Extended replacement cost coverage will pay additional money above the standard limits in the event that a major disaster event causes a rise in construction costs due to an increased demand for building materials and construction workers.  Guaranteed replacement cost coverage will pay for the rebuilding of the home as it was before the loss.  A policy can also include a Building Code/Ordinance endorsement which will cover for any additional construction expenses to comply with new building code requirements.  Inflation Guard is an insurance policy clause that can be added to automatically adjust the dwelling limit for policy renewal to reflect current construction costs in the area. 

Homeowners insurance provides coverage for personal possessions; however, to determine adequate coverage, you should conduct a thorough home inventory to include the replacement value on these items.  The insurance agent should be contacted if you need to increase the limits for personal possessions.  The policy holder can opt to choose a replacement cost policy or an actual cash value policy for the replacement of personal property.  A replacement cost policy pays the actual cost of replacing the possessions up to the limit of the policy.  An actual cash value policy will pay only a percentage of the replacement cost taking depreciation of that item into consideration.  For expensive possessions such as jewelry, the policy may limit the replacement cost.  If these limits are too low, a personal property endorsement may be purchased to provide additional coverage.  The value of these items can be determined by getting the item or collection appraised or by providing the agent with a recent receipt of purchase.

Coverage for additional living expenses if your home is damaged is an important aspect of any homeowner’s policy.  It will pay for temporary housing, restaurant meals and other living expenses until the home repairs are completed.

The liability part of the insurance policy covers you against bodily injury and/or property damage lawsuits that you, your family members, or your pets cause to other people.  This coverage pays for court costs and any damages awarded to the injured party. 

You should purchase enough liability insurance to protect your assets, and if your assets exceed the limits of the policy, you may want to consider purchasing additional liability insurance through an umbrella policy.  Umbrella policies are not part of the homeowner insurance policy and are purchased separately.  It provides extra and broader coverage that start to pay after the homeowner insurance liability policy has been exhausted and paid out.  It also pays for other things that are not typically paid under a standard homeowner or auto policy.

For more information about Pensacola FL real estate, Pensacola MLS or Pensacola FL homes for sale, give our agents a call (850) 995-3222. We would be honored to assist you! From everyone at Grand Realty, thanks for your business  “You’re Almost