Understanding Your Homeowners Insurance Policy: An Introductory Guide

When you’re looking for home insurance in Kent, Ohio, you can quickly encounter a wall of industry jargon that leaves you with more questions than answers. The expert team at BK Insurance & Financial Services is here to help, with a comprehensive breakdown of troublesome terminology along with the basics you need to know when you’re in the market for a new homeowners insurance policy. 

Why Do You Need To Understand Your Homeowner’s Insurance Policy?

Ensuring that you have correct and adequate coverage for your home, other structures, and the belongings stored inside, along with protection against personal liability can be the difference between being covered, or not, when disasters and accidents strike. Now rest assured that at BK Insurance & Financial Services we will never leave you uninformed or out of the loop. But it’s always good to be empowered with the knowledge you need to understand what your policy covers, excludes, and limits. So let’s get started and define some terms.

Homeowners Insurance Terminology

Declarations

Within the first few pages of your homeowners insurance policy, you’ll find the declarations page. It’s a summary that’s customized for your specific policy, home, and insurance needs. You’ll usually find it right at the beginning of your policy documents. Beyond the basic details  (like home address, property description and accountholder information), you’ll also find coverage amounts and terms, any applied discounts, policy start and end dates, and the amount of your premium. It’s worth running through the information here, just to triple check that everything looks right.

Deductible

Listed among coverage amounts, on the declarations page, you’ll also find your homeowners insurance deductible. In the event of a claim, this is the amount that you are responsible for paying before your policy kicks in. Oftentimes, because a higher deductible means that you’re less likely to file very small claims, and willing to foot part of the bill yourself for a large claim, your overall premium may be lower. Less paid upfront means that when something does happen that warrants an insurance claim, you’ll need to be prepared to pay the higher deductible out of pocket. If you have the financial situation that allows for it, a higher deductible could work for you. It’s also important to note that different types of losses can carry different deductible amounts.

Exclusions

Whether it’s titled “exclusions” or “losses not insured,” this section of your homeowners insurance policy paperwork will outline what isn’t covered. Typically your insurance provider will outline situations and scenarios that are not covered, or excluded from, your policy. Common exclusions are floods, earthquakes, and certain types of water damage along with specific property or locations. That said, there are often additional coverage options that can be purchased if your home is at serious risk from an excluded peril. Asking questions about the location of your home and what, if any, natural disaster risks there may be, is a good idea to ensure that coverage gaps are closed.

Endorsements

In a sense, endorsements work hand in hand with exclusions, as they are additional coverage options that provide for situations and scenarios that are otherwise not covered in your homeowners policy. They may also be used to change your policy somehow. Generally speaking, an endorsement is a form of insurance coverage that adds to or deletes current coverages, or adds to or deletes terms or provisions of a policy. For example, most homeowners policies do not cover damage that may result from a backed-up drain or sump pump. But oftentimes homeowners can add an endorsement that will cover these things. You can typically find any endorsements at the end of your policy paperwork. You may also see it referred to as a “rider."

Special Limits

This is a category of coverage limits that apply to items that are highly valuable and prone to theft, and situations that are typically more risky. Set limits on these items and situations allows insurers to manage risk while still keeping coverage affordable. So, for instance, if you own expensive jewelry, furs, artwork, tangible monetary investments, watercraft, firearms, silverware and other high ticket items, coverage built into your homeowners insurance will typically carry limits on how much will be covered in the event of theft or loss. The same holds true for situations that increase your personal liability. That said, you can often add an endorsement or rider to increase coverage limits. An appraisal may be necessary to accurately evaluate the right level of coverage for you.

Peril

A peril is any cause of potential loss or damage to property that is covered by your policy. These can include things like fire, theft, hail or a windstorm. A homeowners insurance policy can be a named-peril policy, which only covers perils that are specifically outlined in the policy. It could also be an all-risk policy, which covers everything that is not specifically excluded from coverage. A peril can also be a cause for personal liability, such as injury to a third party or their property.

Types Of Reimbursement

Common terminology you may see regarding how much will be paid to replace damaged or destroyed property will typically include Actual Cash Value (ACV) and Replacement Cost as contrasting options. ACV payouts factor in depreciation, or replace an item based on the current value of the one lost. Replacement Cost refers to replacing a damaged, destroyed or stolen item with a new item of similar kind and quality.

Conditions

Just as with any agreement or contract, your homeowners insurance is bound by certain conditions. It’s worth looking through these to ensure that you’re able to benefit from the full amount of coverage you’re entitled to. So, for instance, if conditions state that you need to notify police in the event of a theft, protect your property after a disaster, or provide an inventory of damaged or stolen items, you’ll need to comply to ensure coverage when you file a claim. 

Rely on BK Insurance & Financial Services For Home Insurance in Kent, Ohio

There is a lot to know about homeowners insurance–this is really just the beginning. If you still have lingering questions and need solid answers so that you can make the best decision, it’s time to reach out to one of our agents and discuss your concerns. We’d be happy to advise you and set you up with the ideal homeowners insurance policy that directly addresses all your needs. Contact the team at BK Insurance & Financial Services today!