Homeowners Insurance

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Homeowner’s Insurance Policy: How to Read and Understand It

It’s important to understand how your homeowner’s insurance policy works if you want reassurance that you’re fully covered. As well as making sure that you’re actually covered for what you want to be covered for, you also need to know what your obligations are as a policy holder to help you avoid the risk of having a claim rejected.

Most insurance policies come with a guide to help you understand the policy, including a glossary. This guide is a good place to start as it acts as a check list. Check that everything you want covered is included – if it’s not, contact us as soon as possible.

Most homeowner’s insurance policies are produced with a glossary of terms. This is a list of uncommonly used words and phrases that will help you better understand your policy. For example, the term “floater” refers to a specific type of insurance that’s added to your general coverage to protect items of significant value or personal belongings away from the home. Typically, a standard homeowner’s insurance policy limits the amount a policy holder can claim on high cost items such as jewelry. In addition, a floater can provide insurance coverage for your digital camera while you’re on vacation, for instance.

As well as what’s covered, you also need to know the circumstances in which you can make a claim, if necessary. For example, some items may be covered only if they’re stolen, not if they’re lost or damaged.

You will have certain obligations under the terms of the insurance policy and must meet these in order to avoid having a claim rejected. Typically, the three main conditions a provider will need to be met for a successful claim on a homeowner’s insurance policy are:

• Reporting a claim as soon as possible
• Taking steps to protect the property from any further loss or damage
• Co-operating fully with the insurance provider or its agent

As the policy holder, you must ensure that you’re not negligent in any way, as no insurance provider will pay for a policy holder’s negligence. For example, if you identify a problem in your home, (e.g. a leaking water pipe), you must do all you can to rectify it, as failure to do so may result in your insurance provider rejecting a claim you submit in respect of any related damage.

In other words, if the leaking water pipe bursts and ruins a number of carpets in your home, your insurance provider may not pay for the cost of replacing these carpets as it could be argued that the damage was caused as a result of your not having the leaking pipe repaired.

Similarly, if your bedroom ceiling falls in and you fail to have it repaired for a significant period of time, while your insurance provider may reimburse you the cost of having the ceiling damage repaired, it might not pay to put right any problems that subsequently arise as a result of the repair not having been carried out as soon as reasonably possible.

Reading and understanding your homeowner’s insurance policy will mean you’re better informed to make decisions about the level of coverage you currently have as well as what you might need in the future. You will also have peace of mind that you’re fully protected.

What is Homeowners insurance?
Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.

Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.

Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility.

Why do you need homeowners insurance?
It is really all about protecting yourself financially if something unexpected happens to your home or possessions. That's important because chances are your home is likely one of your largest investments.

• If your home was destroyed by fire or damaged by a natural disaster, you'd need money to repair or replace it.
• If a guest in your home is injured, liability protection and medical coverage help pay expenses.
• If you are a victim of theft and vandalism, it can reimburse you for your loss or pay for repairs.
• If you are still paying for your home, your lender will require insurance.

It is important to know that homeowners insurance is meant to cover unexpected damage, not routine maintenance. Ask your agent to talk about what is covered and be sure to read your policy so you know exactly what's included and what is not.

Things to consider and questions to ask your agent
Here are few things to discuss with your agent that will influence your decisions.

• How much will it cost to rebuild my house and replace my belongings if they are damaged or destroyed? (Ask your agent to talk you through your home's features and the things you own so you can make an informed decision about coverage.)
• Does the insurance company have a good reputation for customer service? Is it known for paying claims fairly and promptly?
• What discounts are available? (Ask about multiple policy, security system and fire resistance discounts.)
• What's the process for filing and settling a claim? (Ask who to call and what happens after you file a claim.) 

 

Everyone's needs are not the same, it is best to consult your agent to help assess your needs and find the insurance policy that is right for you.