Buying home insurance policy as a homeowner is an important part of your financial planning, and reading and Understand your Home Insurance Policy is a first step. Home insurance policy can sound complicated, but it doesn’t have to be. Knowing how to read a home insurance policy can help you choose the right coverage and evaluate your policy as your needs change.
How to read and understand your home insurance policy
The declaration page is the most important page when you are trying to understand your home insurance policy. It is usually a page or two long. This will include information related to your policy, such as your name, property address, coverage amount, deductibles, insurance company name, and annual premium.
The policy form is included with the declaration page, and it goes into even greater detail with the language of the policy, such as exclusions and conditions, as well as definitions of important terms. It is helpful to read this first so that you can understand the terms which will be on the first page.
The parts of a home insurance policy
Home insurance policies include different types of coverage, each with their own financial coverage limits. The Main factor is home coverage, and many other standard coverage options are usually a percentage of this home coverage amount. However, depending on your financial capability, you may be able to increase some of these limits or add other endorsements to further personalize your policy.
If you have to file a claim then you should know about that what is on your policy’s declaration page and it can be important. If you have separate policies such as endorsements, add-ons, flood or earthquake insurance, or coverage for electronics and valuables, you will also need to understand the scope of this coverage.
Replacement cost value versus actual cash value
For residence and personal property coverage, either replacement cost or actual cash value applies. With the replacement cost value, the home or personal property will be covered for the cost to replace the damage that has occurred in the covered loss at the time of the claim without depreciating it. Actual cash value counts depreciation when determining your claim payment amount. Some insurance companies automatically include replacement cost for residence and personal property coverage, while others require you to add it as an endorsement.
What is a home declarations page?
The Home Insurance Declaration page is a snapshot of the home insurance policy. It contains important information about the insurance company and the policy, including the named insured, the location of the property and the coverage selected. Coverage limits, deductibles, endorsements, policy numbers and policy terms are also listed on the declaration page. If you have a mortgage, the company will be listed as having an insurable interest in the property.
By reviewing your declaration page, you can see how you and your home are insured against covered losses. The elements included in the Home Declaration page are:
- Policy Number: A unique number identifying your policy. This number is used in all transactions, including filing and tracking claims.
- Policyholder Address: The location of the insured property,
- Policy Term: The start and end dates of the current policy term. Most home insurance policies automatically renew, but if you have a non-renewal policy, contact your property insurer.
- Named Insured: People with an insurable interest in household and the holder of an insurance policy.
- Coverage Types and Limits: The specific coverage types included in the home insurance policy or chosen a person.
- Home Insurance Discounts: A list of discounts you are eligible for will be shown on your insurance policy declaration page.