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Financial Wellness
7 Tips for Buying & Using Homeowner’s Insurance
Protect your property & possessions
Understanding your homeowner’s insurance policy and ensuring you have the right coverage can protect you financially when the unexpected happens.
What’s Covered?
A standard homeowner’s insurance policy covers damage to your property and belongings from fire, theft, vandalism, and certain storms, plus covers additional living expenses if you’re displaced.
The policy includes liability protection if someone is injured on your property. And, the insurance policy may extend coverage beyond your home. For instance, your homeowner’s insurance (not auto insurance) may cover the loss of personal items stolen from your car.
What’s Not Covered?
Home insurance does not cover everything. Standard exclusions include earthquakes, floods, power failures, poor maintenance, and government actions. While windstorms are typically covered, coverage for water damage varies. As a rule of thumb, water from above (rainwater or a burst pipe in an upstairs apartment) is usually covered, but water from below (ground flooding or a backed-up sewer) generally is not. If you live in a flood-prone area, consider additional policies for full protection.
Review your Policy’s Declaration Page for Coverage Breakdown
- Dwelling
Protects your home’s structure, including attached garages. Ensure the limit covers full rebuilding costs. - Other Structures
Covers detached structures, such as sheds and fences, typically set at 10% of dwelling coverage. - Personal Property
Covers belongings, including furniture and electronics. This may cover replacement cost or actual cash value. - Loss of Use
Pays for temporary living expenses if your home becomes uninhabitable. - Personal Liability
Protects against lawsuits for injury or property damage to others. - Medical Payments
Covers medical expenses for guests injured on your property, regardless of fault.
Mike Yurochko, founder of Loti, a recovery platform with both public adjusting services and an entirely free learning hub, has helped thousands of homeowners recover and rebuild after unexpected disasters. After losing his own home in the 2019 Kincade fire, he understands firsthand the stress of navigating the claims process. “Beyond the primary coverages listed on your declarations page, take note of key endorsements that can significantly impact your protection,” he says. “These include debris removal, ordinance or law coverage, and extended replacement cost — factors that can make a crucial difference in claim payouts.”
Take Inventory of Your Belongings
Document valuables in your home to ensure proper reimbursement. Create a list of possessions with receipts, purchase dates, serial numbers, and photos.
Save receipts of new purchases to update your records over time. Remember to keep a backup copy of these files in a safe place.
A video tour/narration is helpful documentation.
Choose the Right Agent and Policy
Home insurance can be complex, so work with a knowledgeable, accessible agent who understands your needs. “Cheaper isn’t always better — proper coverage matters most,” says Yurochko. “Make sure your agent knows about high-value belongings, renovations, or non-traditional uses of your home to avoid coverage gaps. If budget is a concern, consider raising your deductible to lower your premiums instead of cutting essential coverage.”
Replacement Cost Versus Actual Cash Value
There are two methods of calculating the reimbursement of damage to a home. Replacement cost pays to rebuild or repair your home to its original condition — using materials of similar kind and quality — without deducting depreciation. Actual cash value (ACV) deducts depreciation from the reimbursement amount, which could leave you with a major out-of-pocket expense.
Filing a Claim
Know the claim deadlines of your policy since waiting too long to file a claim may result in denial, especially if the delay worsens the damage. Be sure to save receipts, appraisals, and contracts, as well as document all communications with your insurer, including names and dates.
“Not all claims are worth filing — small claims can increase your risk profile and lead to higher premiums,” says Yurochko. “For complex or high-value claims, consider hiring a licensed public adjuster. They understand policy intricacies, can organize your claim effectively, and advocate for the best outcome, reducing the hassle of dealing with insurers.”
Optimize Your Knowledge
Whether you’re a first-time home buyer or a seasoned homeowner, it’s important to know how your home insurance can protect you and your home.
Loti (www.loti.com) offers free online resources with helpful considerations for your homeowner insurance policy, guides to navigate insurance claims, home repairs, and essential tips to protect and maintain your home.
Read more of our Financial Wellness artocles about Home Ownership.
