What every homeowner should know about their property insurance

Insurance is required on a home by the mortgage company, but homeowners rely on it for peace of mind also.  Unfortunately, people may not take the time to investigate their policy and what it covers until they need to file a claim, which could be too late.

While it may not seem like the best use of your time, an in-depth visit with your property insurance agent once a year could be valuable to you if you have losses and could increase your peace of mind.

The following are some questions you can ask your insurance agent:

• What is the insured value of the policy and the replacement cost of your home?  Insured value is the amount that would be paid for a total loss but replacing the home could cost more than that amount.
• What is the deductible?  Higher deductibles on the first amount of the loss are one way to lower the cost of the premium.  It may sound good when you're having to pay for the policy but feel very different at the time you file a claim.
• What does the policy cover? Typical policies cover fire, theft, vandalism and storms.  Homeowner policies bundle personal belongings and some liability coverage.  They can differ not only from company to company but from policy to policy.  Be clear on what is covered.
• What does it not cover? ... Some perils are usually not covered by policies like hurricane, flooding, power outage, rising water and earthquake.  It can be confusing because a broken pipe might be covered but rising water from backed up sewer is not.
• What is your anniversary date? ... Policies are usually written for one-year and should be renewed before they expire.  Mortgage companies like to renew them a month before they expire so there will not be a lapse in coverage.  That is why borrowers with escrow accounts for taxes and insurance must fund them accordingly.
• Is it paid by an escrow account with the mortgage?  New homeowners should verify that their house payment includes 1/12^th the annual taxes and insurance so they will not be surprised with a large bill when they become due.
• Does your policy include liability coverage? ... This covers claims made by third parties of bodily or property damage done by the insured.  It could be as simple as a guest slips and injures themselves in your home.  It is important to know the limits of liability and consider larger amounts especially, if you have a higher net worth or risk profile.
• What is an umbrella policy? -  This is a separate policy that increases the liability coverage above the limits of the homeowner's policy.  It can be a relatively inexpensive coverage.
• Are personal belongings included? ... Most homeowners policies include an amount toward personal belongings like furniture, rugs, housewares, and clothes.  It may be expressed as a percentage of the overall policy.  The question is: will it cover your belongings or does it need to be increased?
• What is the process to file a claim? ... Most claims require proof of purchase or a current inventory of the home.  Since most people don't have receipts except for big ticket items at best, the inventory becomes important.  Videos, still pictures or a detailed list can help to satisfy this need.  Click here for a digital Home Inventory.
• Are there additional living expenses included? ... Some policies include temporary living expenses if you are displaced from your home. 
• Does a home office require additional insurance? ... Many homeowners work from their home and have special equipment that may not be covered normally.  If you "meet and greet" people at home, ask about additional liability coverage.
• Ask about floater policies on big-ticket items? ... Some items like jewelry, furs or collectibles need to be scheduled or covered on a separate policy.

Insurance is meant to give you peace of mind against possible losses that could financially harm you without it.  Because insurance is very specific about what it does and does not cover, it is important that you have a good understanding of your policy.  A policy is a contract between you and the insurance company, and it deserves due consideration.