When you sit down with your insurance agent to put together your homeowners insurance package, one of your primary objectives is to choose the policy limits that will minimize your financial losses for any potential claim. After all, you don’t want to face a high repair bill for your home after your insurance policy has already paid up to its limits.
Let’s take a closer look at how you should choose those limits appropriately.
Dwelling Coverage Limits
The most important part of your homeowners insurance is probably your dwelling coverage. It will help you repair your house following damage like fires, vandalism, severe weather and other unexpected hazards. Your policy will need to cover your home at its replacement cost value, which is the value necessary to rebuild it completely following a total loss. This is not the selling price of the home. Rather, it is the actual cost necessary to construct (or reconstruct) the home at today’s value.
You can work with your real estate agent and a local contractor to appraise the dwelling appropriately and add that value to your insurance policy. Keep in mind, as you make any additions or renovations, you will need to update your policy.
Possessions Coverage Limits
Your possessions coverage will pay for damage to belongings inside the home, including things like furniture, clothing, electronics and appliances. You should choose a coverage limit that reflects the cumulative value of all of these items. However, there are some important things to keep in mind:
- Your coverage will usually only pay for items at their actual cash value (their used values at the time of the loss. However, you can upgrade your benefits to replacement cost coverage by adding a specific endorsement to the plan.
- If you have particularly expensive items—jewelry, artwork, musical instruments, collectibles—then you can augment your coverage with scheduled items riders that will specifically insure those items at their full values.
Liability Coverage Limits
Another critical part of your homeowners policy is your liability coverage, which helps you repay others when you are at fault for injuries or property damage that they sustain. For example, if a neighbor gets hurt in your home and then sues you for their medical costs, then this coverage will help you repay them for the requisite costs.
When it comes to liability insurance, the higher the coverage, the better assistance you will have in case of high claims. It is advisable to choose liability coverage that at least reflects your personal net worth.
Adjusting Your Deductibles
Your possessions and dwelling insurance will include deductibles, which are dollar amounts that you agree to pay before your insurer will cover the remainder of a claim. For example, if you have a $1,000 deductible, then your policy will only pay for claims that cost more than $1,000. You must pay that first $1,000 worth of damage costs yourself. Therefore, it’s imperative that you choose a deductible that you can afford to pay on your own.
Also Read: Natural Dangers Homeowners Face in Campbell, Kentucky
Get A Quote