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Best Insurance Protection

home-10Your homeowner’s insurance policy may not provide the coverage that you think you are paying for. Lots of people have learned their homeowners or other insurance policy won’t pay for something the hard way – when they get a claim rejected. The best insurance protection is actually simple.

You can avoid the nightmare of not having the right coverage when you need it by reading your policy and finding out if it actually meets your needs.

Wading through the legalese in insurance policies isn’t exciting but it can save you a lot of grief when you need that coverage. This can be difficult because insurance companies are experts at writing policies that confuse consumers.

You’ll need to sit down and actually take the time to really concentrate on reading your homeowners or renters’ insurance policy. If you’re smart you’ll read it over a few times because it can sometimes take a while to figure out what’s covered and what’s not to get peace of mind and the best insurance protection.

What to Look Out for

There are some things that you should look for when you finally read the policy. The first is exclusions, which are damages that the policy will not cover. Exclusions can vary widely from state to state and region to region. Understanding them before a fire or other catastrophic event can be your best insurance protection.

For example earthquake damage is excluded from policies in California. Other common exclusions include wildfires, tornadoes and hurricanes. If there is a high risk of some sort of natural disaster in your area there’s a good chance it’s excluded. You will need to get a rider or additional coverage for excluded claims.

Look for the phrase high value items, which usually means expensive stuff like jewelry, antiques and collectibles. But it can mean any item over a certain value. A good rule of thumb is that most policies will not cover cash, precious metals, or jewelry stored in your home – unless you pay extra for a rider to cover the stuff.

Depreciation and Actual Cash Value

Another word to watch out for is depreciation. Homeowners policies base the amount paid in claims on depreciation or losses over time. That means it pays you an amount based on what you can sell items for now rather than the cost of replacing them. Some insurers will try to hide depreciation with the phrase “actual cash value.” That’s a very bad deal for you.

Here’s how actual cash value works. If your five year old TV set gets stolen the insurance company will send you a check for the amount you can sell that old item for at a garage sale – not for the cost of buying a new set. The difference can be several hundred dollars. You’ll end up at the thrift store looking for a used one because the insurance company’s check might be less than $50.

The coverage you want is specified replacement value, which means the insurer will pay the cost of replacing the item with a brand new comparable item. The company will cut you a check for the cost of a new flat screen TV similar to the one stolen rather than the value of the old one.

Make sure the insurance policy specifies replacement value. If it doesn’t you’re getting a bad deal from the insurer. Insurance companies don’t generally have your interests upfront. Their best allegiance is to their stock holders.

Finally, there are some claims that no standard homeowners’ policy will cover. These include claims related to home-business activities and flood or water damage. You will need to pay for additional insurance to cover those.