GuidesRisk protection7 min read

Homeowners insurance: read your policy before you need it

Most households find out what their policy actually covers on the worst day of the year. An hour of reading now avoids that.

Know the six parts of your policy

Almost every standard policy is built from the same sections. Find each one on your declarations page.

Dwelling: the structure itself, rebuilt at today's construction costs
Other structures: fences, sheds, detached garages, usually a percentage of the dwelling limit
Personal property: belongings, often 50 to 70 percent of the dwelling limit
Loss of use: temporary housing and extra living costs while repairs happen
Personal liability: injuries and damage you are responsible for
Medical payments: small guest injury bills without a liability finding

Check whether your dwelling limit still makes sense

Construction costs rise faster than most policies adjust. An underinsured home is the most expensive gap in household finance.

Ask your insurer for the current rebuild cost estimate, not the market value
Add extended replacement cost if your area has had recent building cost spikes
Add an ordinance or law endorsement if your home is older than local code
Re-check the limit after any renovation or addition

The exclusions that surprise people

Standard policies leave out several common losses. Each one has a separate solution.

Flood damage needs a separate flood policy, with a waiting period before it starts
Earthquake damage needs an endorsement or a standalone policy
Sewer and drain backup is usually an inexpensive add-on, not a default
Gradual leaks, mold, and maintenance issues are excluded as wear and tear
Home-based business equipment and inventory are often capped very low

Prepare the claim before the loss

Claims move faster for households that already have proof. Do this once and store it off-site.

Keep a room-by-room inventory with photos and replacement values in cloud storage
Save the declarations page, agent contact, and claim phone number where you can reach them offline
Photograph the roof, systems, and exterior each year so pre-loss condition is documented
Know your deductible and whether it is a flat amount or a percentage of the dwelling limit

Common questions

Should I insure my home for market value or rebuild cost?

Rebuild cost. Insurance pays to repair or rebuild the structure, so land value and market pricing are not the right basis for the dwelling limit.

Will filing a small claim raise my premium?

It often does, and multiple claims can affect renewal. For losses near your deductible, paying out of pocket and keeping the policy for large losses is usually the better trade.

What is a percentage deductible?

Some policies apply a percentage of the dwelling limit for wind, hurricane, or hail losses. On a $400,000 limit, a 2 percent deductible is $8,000, so confirm which type you have.

See where your household stands

The Household Resilience Check scores this dimension along with seven others in about five minutes.

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