Insurance – What You Need To Know
Homeowners Insurance
Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.
Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners’ responsibility.
Flood Insurance
Flood coverage is available in the form of a separate policy both from the National Flood Insurance Program – NFIP (888-379-9531) and from a few private insurers.The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions.
The NFIP policy provides replacement cost coverage for the structure of your home, but only actual cash value coverage for your possessions. Replacement cost coverage pays to rebuild your home as it was before the damage. Actual cash value is replacement cost coverage minus depreciation so that the older your possessions are, the less you will get if they are damaged. There may also be limits on coverage for furniture and other belongings stored in your basement.
Don’t wait for a flood season warning on the evening news to buy a policy—there is a 30-day waiting period before the coverage takes effect.
