Home Insurance 101: Key Terms Every Homeowner Should Know
So, you’ve taken the big leap into homeownership – congrats! Now, let’s make sure you’re not scratching your head when it comes to home insurance. We’ve all been there, reading through policy documents and feeling like we need a translator. Fear not! Here’s your go-to guide for the basic home insurance terms you need to know.
1. Premiums – The Price of Peace of Mind
It’s the amount you pay (usually annually or monthly) to keep your insurance policy active. If you have an escrow account through your mortgage, then your mortgage is typically the one who pays for the homeowners insurance.
2. Deductible – Your Share of the Pie
This is the amount you’ll need to pay out-of-pocket for a covered claim. Picture this: your kitchen floods (yikes!), and the repair costs $5,000. If your deductible is $1,000, you’ll pay that amount, and your insurance covers the remaining $4,000.
3. Liability Coverage – Your Safety Net
This protects you if someone gets hurt on your property and decides to sue you. Whether it's a slip on the icy driveway or a tumble down the stairs, this part of your policy handles legal fees and medical expenses. No one wants a lawsuit on their hands, so liability coverage is your home’s best defense.
4. Replacement Cost vs. Actual Cash Value – The Big Debate
Replacement cost covers the expense to replace damaged items with new ones of similar kind and quality. Actual cash value, on the other hand, factors in depreciation – like when your five-year-old TV bites the dust, you won’t get enough to buy a brand-new one. Knowing the difference can save you some serious cash (and heartache).
5. Riders – Your Policy’s Sidekicks
These are additional coverages you can add to your policy for items that your standard policy might not fully cover, like expensive jewelry, work tools, and camera equipment. All standard homeowners insurance policies cover your personal items, but there is always a limit. If you have really expensive items that are worth more than the limit, you should definitely consider adding additional coverage for those items.
Make sure you don’t wait until disaster strikes! Get a free quote today and see how we can help you protect your biggest investment. Let’s make sure you’ve got all the coverage you need.
