Five things to Know About Homeowners Insurance

Here are five essential things you should know about your home insurance policies.

1. Know about the exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These types of coverage must be bought separately.

2. Know about dollar limitations on claims. Even if you are covered for a risk, there may be a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately.

3. Know the replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient.

4. Know the actual cash value. If you chose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called real cash value.

5. Know the liability. Generally, homeowner’s insurance covers you for accidents that happen to other people on your property, including medical care and court costs. However, there is usually an upper limit to the coverage provided. Be sure that it’s sufficient if you have significant assets.