Keeping Nashville Covered – What Insurance Protects
You are looking to insure your home and your agent asks, “how much coverage do you want?” Your eyes glaze over as your head starts swimming. “I don’t know; how much do I need?” is a VERY common response. I am here to help you understand and be confident in answering that very question! Homeowner’s insurance protects three aspects of your finances: the structure in which you live, the contents inside the structure, and your legal liabilities.
First, of course, homeowner’s insurance protects the home you own. In cases of fire, tornadoes, vehicles crashing into your dwelling, and other such unforeseeable occurrences, insurance will provide the funding to repair or rebuild your home. (Most policies also provide for temporary housing while your home is being fixed, such as an extended stay hotel or short-term apartment.) To dispel a common misconception, the amount of coverage for your dwelling has nothing to do with how much you could sell it for or how much you think it’s worth. As you know from buying the home, markets fluctuate dramatically, depending on the neighborhood or even the time of year! Rather, the coverage amount for your structure should be based on how much it would cost to rebuild the structure back to its present condition in the event of a total loss (i.e. burned to the ground.) This is not going to pay to upgrade your kitchen to the newest trend; it will pay to put your kitchen back the way it was. To make sure you have accurate coverage, consider construction costs, material costs, etc. in your area. Consult a building professional, if need be. And keep in mind that your mortgage lender may have a minimum covered amount for which they require the dwelling to be insured.
The second piece that insurance protects is the contents within your home. Oftentimes, it is a percentage of the covered price for the structure. The contents, also referred to as personal property, are covered in the event of a loss of the structure (like a fire) or in case of theft. This means everything from your televisions to your couches to your dishes to your clothing. The best way to make sure you get items replaced accurately is to have an inventory. Write down what you have (including the make and model, when you bought it, and for how much, if possible.) Make a spreadsheet you email to yourself, so it can be retrieved anywhere. Take photos or a walk-through video and keep it in a firebox or at the bank in a safe deposit. That way, in the event of a total structural loss, you still know what you had and it can be quickly and accurately replaced. And just like with your structure, the goal is to get you back to what you had. Being accurately insured (not over- or underinsured) is very important. You want back the property you had. You will not get Jimmy Choo shoes to replace your Jessica Simpson heels. But you also do not want your Louboutins that were stolen to only be insured enough to buy a pair of Payless shoes…
(Sometimes, there are limits for certain categories, like fine arts, jewelry, furs, etc. Refer to prior blog posts for more information on these limits.)
The final thing that homeowner’s insurance protects you against is liability loss. This is protection against someone being injured while on your property or injured by you, your family, or your property. If someone trips on an unlevel step leading to your porch or bitten by a dog while you are taking a walk, personal liability coverage will protect you from having to cover these medical expenses. Your insurance company will work with the injured party and (hopefully) protect you from a personal suit and cover medical expenses and the like.
I hope this helps you better understand how insurance on your home protects you. Stay tuned next week to understand the costs, deductibles, limits, and benefits a policy can offer!