Insurance Coverage

When buying homeowners insurance there are several factors to consider. In areas where severe storms are common, it is especially important to understand the type of insurance policy you have, the limitations of your policy, what it covers and the types of storms for which you may not be covered.

Many homeowners have already experienced a severe hailstorm and witnessed the damage hail can cause to homes, automobiles, businesses and other property. When a hailstorm hits, it does the greatest amount of damage to the exterior of your home or property. Common types of damage caused by hail are: roof damage, siding damage, shingle damage, window damage and automobile damage. Learn how to identify storm damage.

Most standard homeowners' policies, also known as HO-3 policies, cover both your home and its contents. Typically, you are covered against storm damage, theft, pet damage and some major disasters, such as tornadoes, hurricanes and hail. 

Earthquakes and floods are usually not covered under most standard insurance policies and require a separate policy. Remember, home insurance policies do not cover poor maintenance or normal wear and tear, so it is a good idea to make sure your home is always properly maintained. 

Before buying homeowners insurance, the first thing you need to determine is the replacement cost of your home. The replacement cost reflects the total cost of replacing the structures on your property. This is typically different than your home's market value or sales price, which takes into account other factors, including the value of your lot. 

An easy way to determine your replacement cost is to multiply the building cost per square foot of your home by the total square feet. If you don't have a good sense of building costs for your area, any local contractor should be able to give you a good idea of average building costs in your area. 

 Once you know your replacement cost, you'll know what your insured liability limit should be. The liability limit is the amount of coverage you have if something, such as a tornado or other serious storm, destroys your home. Most experts recommend liability limits equal to the replacement cost, so if your home is destroyed, your insurance will cover the costs of restoring or rebuilding your home, including living expenses if you are unable to inhabit your home. 

If you live in an area prone to flooding, make sure you obtain flood insurance, which is typically a separate policy. If you have questions about your coverage, check with your insurance agent and make sure you have a solid understanding of your coverage, especially as it relates to serious storm damage or other catastrophic losses. 

Whatever type of insurance you choose, it's always wise to take an inventory of the items in your home. If your home is completely destroyed, you cannot remember all of the items you own unless you have a detailed inventory and pictures of what is inside. Store your inventory list and photos in a separate, secure location, such as a bank safety deposit box, is always a good idea. If you have a digital camera, take pictures and email them to yourself, along with your inventory list. 

A deductible is the amount you are required to pay out of pocket before your insurance kicks in. Typically, homeowners insurance deductibles range from $250 to over $1,000. So, if a hailstorm damages your home and incurs $10,000 in damages, and you have a $500 deductible, the insurance company will pay $9,500 towards your repairs. The higher your deductible, the lower your premium will be. 

When deciding on a deductible, ensure it's an amount you can develop quickly that won't create a financial strain or hardship. Some companies are now offering policies with high deductibles, including deductibles that are calculated as a percentage of your home's value. For example, if your home is worth $200,000 and you have a 2% deductible, you will have to come up with $4,000 before your insurance pays anything. While these types of policies can offer a lower premium, make sure you can cover the deductible cost in case a severe storm or disaster hits your area.