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Do You Know What Your Homeowner’s Insurance Policy Covers?

Do you know what your homeowners insurance policy covers? If your house was damaged or destroyed, do you know how much you would get to rebuild?

If you don’t know, you are not alone. According to U.S. News [3], “Almost half of all homeowners” in a recent MetLife survey “didn’t know how much insurance coverage they had for the contents of their home, and 1 in 3 didn’t know how much their home was insured for.”

Ignorance is not bliss in this case. In fact, it can be quite costly.

Surprising Events that Are Not Typically Covered by Homeowner’s Insurance

Earthquakes Unless you purchase a separate policy for earthquake coverage, you’re probably out of luck if your home is damaged by an earthquake. Considering earthquakes typically damage the structure and foundation of your home, not having earthquake insurance can be very expensive.

Floods Flooding can cause serious damage that can lead to mold if not properly cleaned and repaired. We don’t live in a flood prone area, but a few years ago, we got so much rain in a short period of time that the homes by the small river in our town flooded as well as the homes up to a half mile away. I am guessing the majority of the home owners did not have flood insurance. Flooded couches, chairs, televisions, exercise equipment and carpets littered the side of the road waiting for the garbage company to carry it away.

The Full Value of the Contents of Your Home Most homeowners’ policies let you choose the level of coverage for your home. You can either choose the depreciated value of the contents of your home or the replacement value. Many opt for the depreciated value to save some money on the policy, but that is not usually a smart move. If you do need to replace the items in your home, you may find the depreciated value leaves you tens of thousands of dollars short. For instance, your depreciated computer may only be worth $200, but it will probably cost you $400 to $600 to replace, the difference of which must come out of your pocket. If you opted for replacement value, your insurance will likely cover the full cost of replacement.

Renters Need a Renters’ Insurance Policy

You may think if you are a renter you don’t need a renters’ insurance policy, but that is not true. Your landlord’s insurance policy will cover his expenses for repairing a property should it become damaged in some way, but the landlord is not responsible for insuring your personal items. You still need renters’ insurance, especially for these fairly common occurrences:

Theft If someone breaks into your apartment, you are out the full cost of those items if you don’t have renters’ insurance. If you do have it, your insurance policy will cover your cost of goods for the depreciated price or the full price, depending on what level of coverage you chose.

Fire While not as common as theft, fires do happen. I have a friend who owns a 6 unit apartment complex. One of the tenant’s grandsons was playing with matches and started a fire that damaged almost every unit. Luckily, no one was hurt, but only those in two of the six units had renters’ insurance. Those two will get reimbursed for buying new items to replace what was ruined in the fire. The rest will have to replace everything themselves.

Think about the contents of your apartment. Replacing everything would cost thousands of dollars, while a renters’ policy typically costs less than $10 a month.

Do you know exactly what your homeowner’s insurance policy covers?