Understanding Your Home Insurance Policy

Are your home and possessions adequately protected in case of loss or damage?  A good home insurance policy is essential for protecting your property and possessions.  However, even if you have a home insurance policy, companies can often be quite specific about what they'll cover and under what conditions.  In the past, insurance documents were often incomprehensible to the average person.  Fortunately, there is but a recent trend toward simplifying the language and making your home insurance policy easier to understand.  Let's take a look at some of the provisions or sections you can expect to find in your home insurance policy.

There are some general ways to think about your home insurance policy that will help you understand what's in it.  Most home insurance policies include a list of features and benefits as well as a list of exclusions and limitations.  In other words, they tell you what they are providing and what they will cover, and then they give you exceptions to that and tell you just how far their coverage will go.  In addition, the average home insurance policy contains both specific policy schedule information that applies to you and you alone, as well as generic coverage information that applies to all policyholders.

Your home insurance policy will most likely start out with the name of the insurer, the type of insurance (like buildings cover or contents cover), and information about your property and its location.  A section of definitions is usually located very near the front of your home insurance policy.  The definitions section contains the legal meanings of words that will be used throughout the home insurance policy. 

To the average homeowner, definitions of some words may seem self-evident.  But as you might imagine, when money is involved, the company wants to be sure that everyone is on the same page regarding the usage of words. You'll want to check this section to see what the company means when they use important words like "contents."  This will help you understand better what's covered and what's excluded.

Next, your home insurance policy may have a section of specific provisions.  The company will list specific insured events in which they will provide cover, like fire and smoke, earthquakes, lightning, theft, floods and other potentially damaging events.  Your insurance company will also list any exempted events which will not be covered, like subsidence or intentional damage.  If your policy includes coverage for accidental damage and legal liability coverage for injuries to others, information about those provisions will also be included in this section.

If you have combined buildings and contents cover with the same company, information about both may be listed in the same policy.  Important points to double check include the maximum limit on your contents coverage and any specific items that might be exempted.  As far as contents coverage goes, it's important that you don't under-insure.

Your home insurance policy will also include information about any excess that you'll be required to pay on a claim.  A high excess can save you money on premiums, but you should be prepared to pay that excess on short notice.  Your policy will also include information on the duration of the policy; that is, how long it's in effect. 

You should also find information about your right to cancellation.  Almost every home insurance policy gives you at least 14 days to cancel if you have second thoughts.  Finally, your home insurance policy should include information on how to make a claim.  Most likely you'll be able to make a claim using a toll-free telephone number.  There may be online options as well.

Your home insurance policy is an important document and you shouldn't take anyone's word for what's contained in it.  Today's policies are written using language that anyone should be able to understand.  So take the time to make sure that your home and treasured belongings are well taken care of.