As summer starts, it brings the threat of floods, hurricanes, tornadoes, wild fires, and other natural disasters that can threaten your life, property, and livelihood. We’ve previously talked about protecting your finances with health and auto insurance, so today, let’s talk about covering your losses from property damage with property insurance.
Types of property insurance:
- Homeowners Insurance: required by lenders if you own a home with a mortgage. A standard policy will protect the structure of your home from things like fires and fallen trees. Policies usually include personal property coverage. If the things in your home are damaged or stolen, your policy will cover your loss.
- Flood Insurance: protects against floods, since standard policies usually do not cover flooding or seepage. It is required by lenders if your home is located in a flood plain. Once purchased, flood insurance has a 30-day wait before it goes into effect.
- Renters Insurance: not required, but if you rent your home, it’s recommended for covering personal property losses due to damage or theft.
What to look for in your homeowner’s or rental policy:
- The deductible is the amount you are responsible for paying before the insurance will pay the rest. Make sure it’s affordable, but remember, the policy cost will go up if you request a lower deductible. The deductible can either be a percentage of the value or a fixed amount.
- Property values often increase over time, especially if you’ve made improvements on your home. Make sure your home value is accurately reflected in your policy, or you might not have adequate coverage. The same suggestion applies to personal property. Don’t try to save money on your rental policy by under-valuing your property, or your losses might not be sufficiently covered.
- Policies can provide different type of coverage: replacement value or replacement cost. Replacement value coverage is often lower than replacement cost because it takes into account declining value due to age and use.
- What sources of damage are covered? For example, water damage from a pipe leak is usually covered, but not water damage from flooding or seepage.
What might NOT be covered by your homeowner’s insurance policy?
Insurance has its limits! Read your policy carefully so you know which hazards may leave you unprotected. Common exclusions include:
- Flooding and earthquake damage
- Water seepage from outside your home
- Injuries from certain high-risk dogs. Check with your company regarding breed.
- Termite damage
- Acts of violence or war
- Damage caused by the homeowner negligence.
What other actions should you take to protect yourself?
- Review your coverage annually to make sure your insurance policy meets your financial needs. The Maryland Insurance Administration has a helpful guide.
- Keep an itemized list of the things you own. Take pictures or a short video of all of the rooms in your home. Record valuable possessions, and when possible, include descriptive information such as model and serial number.
- Keep records in a safe, fireproof location so they won’t be damaged along with your property.