Having effective coverage is undoubtedly a valued asset, but despite its integral role in protecting your family’s future, you still might have questions about how homeowners insurance really works. After all, you cannot hope to take full advantage of your investment in a policy if you don’t understand exactly what it covers and what it doesn’t.
So, to find out some of the most common questions consumers have about homeowners insurance, we reached out to Ray Eng, vice president of insurance sales for AAA Northeast, and his team. With their help, we identified the most frequently asked questions about homeowners insurance and present them to you for a bit of clarification on the ins and outs of your policy.
I have recently added a small addition to my home. How does this impact my home insurance policy?
Whenever you are planning significant upgrades or remodeling to your house, you should reach out to your insurance agent to update your policy accordingly. Something as simple as painting wouldn’t qualify but adding a room or installing new kitchen cabinets would add value to your home. You want to ensure that your policy accurately reflects your home’s worth, allowing for the most comprehensive coverage.
Is my property covered while I’m on vacation or away from my home?
Yes, of course. Your policy applies to your home even when you and your family are out. No matter if you are down the street or on a European tour, your property is covered under your homeowners insurance worldwide.
Do I need to buy additional coverage for certain high-value items, such as jewelry?
The answer to this one depends on your policy. Homeowners insurance typically has limitations when it comes to the liability for certain types of personal property. If you have any questions about a specific type of valuables such as jewelry, furs, cash, silverware or firearms contact your insurance agent to determine your policy’s limits and, if necessary, to buy additional coverage.
Why is my home insured for more than its market value?
In some instances, your coverage will exceed the market value of your home, especially if you have replacement cost coverage applied to your policy. Rather than adhering simply to the current purchase price of your home (i.e., its market value), this amount reflects the cost necessary to rebuild your home in the event of a total loss. If you’re unsure of which is stated in your policy or want to change it, contact your agent to do so.
Does my homeowners insurance policy cover damage from earthquakes?
The basic homeowners insurance policy doesn’t have protection for damage from earthquakes included in your coverage. However, if you deem it necessary, you may purchase an endorsement that guards against earthquake damage. Depending on where you live, such a provision would certainly be a wise move. Just be aware that a separate deductible may apply when you update your policy.
I don’t live in a flood zone. Do I still need flood insurance?
Like earthquake coverage, flood insurance is not included in a basic homeowners insurance policy, and if you aren’t in a flood zone, you should be able to protect yourself from common occurrences like storms and flash flooding. But if you did live in an area for which flooding is a serious risk, you should consider purchasing flood insurance, though you would have to acquire a separate policy. Learn more in our flood insurance FAQ.
What’s the difference between replacement cost and actual cash value?
In this case, the amount you receive if you experience a loss will greatly depend on whether your policy is tied to replacement cost or actual cash value. If you have actual cash value applied, you will be entitled only to the depreciated value of the damaged item(s). With replacement cost, however, you would receive the paid replacement value (i.e., the amount it costs to replace the items in question).
What’s a hurricane deductible?
Much like how you need specific coverage for earthquakes, floods and other disasters, a hurricane deductible isn’t part of your basic homeowners insurance policy. Rather, this is a separate deductible that provides protection from any damage to your home resulting from a named storm. This can be detailed in your policy as either a flat dollar amount or a percentage of your dwelling coverage. Reach out to your agent for further details about what works best for you. Learn more about hurricane insurance deductibles.
Hopefully, we’ve addressed some lingering questions you may have had about your homeowners insurance. Of course, you can always contact an experienced AAA Insurance agent to learn more AAA homeowners insurance or get a quote.