Is the low price you found for that online homeowners policy really a good deal? Here are some things to check to make sure. Many policies marketed online do not have the comprehensive coverage you may need at the time you have a loss.
1. Do you have Guaranteed Home Replacement Cost? Many companies no longer offer this coverage. It provides that even in a disaster situation, the insurance company will pay whatever it costs to replace you home with like materials. Even if there is extensive damage in your area and costs skyrocket, you are protected. Many people mistakenly believe that if they have “replacement cost” on the policy it is the same thing. Replacement cost has a limit on the policy and will not cover increased cost of construction from a widespread disaster. Some companies will write an “increased cost endorsement” usually represented with a percentage (like 125%). This provides some coverage (25% more than the calculated replacement cost), but can still leave you responsible for increased costs of reconstructing your home.
2. Watercraft Liability Exclusion. Do you occasionally rent or borrow a boat? Many discount home policies do not cover your liability for use of a boat you don’t own.
3. Other Structures are Excluded. That nice gazebo, shed or storage building on your property may not be covered.
4. Water Backup Coverage is Not Available. What happens if the sewer or septic tank backs up into the basement? How expensive would it be if the city sewer backs up into your basement? In Michigan, most homes, even if the basement is unfinished, put many of the home’s mechanical equipment in the basement. What would be the cost to replace the furnace, water heater, water softener and other items if they are ruined from at water backup? This can add up to a significant expense that your “bargain” policy may not cover.
5. Debris Removal. Will the policy cover removing debris, or is does the insured get to cover those costs?
6. Mortgage Extra Expense. Mortgage rates are at an all-time low, and may be heading up again soon. What happens if you have a total loss, and you have to take out a new mortgage? Do you have any coverage to help with the increased payments you may have to make due to a higher interest rate?
7. Refrigerated Products Spoilage. Do you have coverage for that side of beef you just bought and put in your freezer?
While these items may seem trivial, when you have a claim they could result in your having to pay out of pocket for thousands of dollars of expenses. Is it worth it to save a few dollars on your home insurance policy and potentially be on the hook for thousands of dollars in losses?