Is your Home Properly Covered?

May 19, 2020

Your insurance has to cover the costs of restoring your house at present construction costs. Sadly, some homeowners only buy enough insurance to satisfy their mortgage lender. Others equate the worth of their home's real estate with the expense of restoring it.

Simply put, if you want to have enough insurance coverage to repair your home in the event that it is totally ruined, make sure to remember the following:

  • Replacement cost - Some plans cover the repair cost of structural damage. The replacement cost policy shall pay for the repair or replacement of damaged goods with materials of a similar nature and quality.
  • Extended replacement cost - That form of policy offers extra insurance coverage of 20% or more in excess of the limits of the policy, which could be important if there is a major catastrophe that drives up the cost of construction materials and labor.
  • Inflation guard - This plan automatically updates the cost of repairing your home to reflect improvements in the cost of construction. Find out whether this provision is included in your contract or if you need to buy it separately.
  • Ordinance or law coverage - If your home is seriously damaged, you will need to rebuild it to comply with new (and sometimes stricter) building codes. Ordinance or statute insurers shall reimburse a fixed amount in excess of these expenses.
  • Water back-up - This coverage ensures that your property is protected for sewer or drain back-up damage. Most insurers sell this as an add-on to the regular policy.
  • Flood insurance - Standard home insurance plans cover disasters such as burning, lightning, and hurricanes. These will not have flood prevention (including hurricane flooding). Excess Flood Insurance, which has higher liability limits than The National Flood Insurance Program (NFIP) in the event of a major flood failure, is applicable to some insurers. Bear in mind that there is a 30-day waiting period until the insurance policy is valid.