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Louisiana Insurance Report

How Home Insurance Actually Works

Posted by Levi Kastner on Jan 22, 2020 1:15:31 PM

How Home Insurance Works | Thimmesch Kastner Insurance | Lafayette LA

Find out how your homeowners insurance policy works so that you can make sure you have the right coverage.

How does home insurance actually work? This is a question we sometime get in our office.

Fear not, we are here to explain and make all this easy for you to understand, if not. Just call us! 

If you own a home, you need to have homeowners insurance.

Chances are the bank will require you to have a policy if you have a mortgage -- but getting covered is essential and required, even if you own your home outright it makes sense to purchase a Home insurance policy which provides protection from various calamities that could cause major financial loss.

It's worth your time to make sure you have the right policy in place, or at least pick out an insurance agent and broker that takes the time to explain your coverage. 

To ensure you're fully protected by your home insurance policy, you should also know a few key details about exactly how this coverage works.

When you have a clear understanding of the protection your coverage should provide, you can review the terms of your policy and make adjustments, as needed, to reduce your risk of financial harm.

Sounds like a lot or work? Well it is, that's why choosing your agent is so crucial.

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What does homeowners insurance actually cover?

A typical homeowners insurance policy will provide three specific types of coverage:

Liability protection

This is the coverage you'll rely on if someone falls down the stairs in your home or your dog bites someone. If you're sued because someone gets hurt, your liability insurance will pay legal fees and cover the costs of any settlement or judgement against you.

A lawsuit could be very expensive to defend against, and losing one could leave you on the hook for hundreds of thousands of dollars in medical bills, lost wages, and other damages -- depending on the severity of the injury. Ensure you have sufficient liability coverage so your insurer, and not you, gets stuck with the bills. 

Protection for your dwelling and other structures

You'll also need coverage to protect yourself in case something happens to your home or other structures on your property, such as a screened-in lanai, a freestanding garage, or a barn.

Coverage for your dwelling could pay for repairs or rebuilding your home or other structures in the event that a problem is caused by a covered peril.

If your barn burns down or your home is damaged when a pipe bursts, your policy should cover you.

Protection for personal property

You likely have most or all of your possessions in your home -- and probably can't afford to replace everything you own.

Personal-property protection gives you the money you'll need to replace your stuff if it's damaged or destroyed by a covered peril or if it's stolen. 

Make sure your policy has all of these different types of coverage -- unless, of course, you can afford to defend against very expensive lawsuits, rebuild your home, or replace your property from scratch if something happens.

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types of coverage's for a home policy

Many types of coverage's for a home policy exist such as

  • HO3,
  • DP1,
  • DP2,
  • DP3, or 
  • Basic,
  • Broad, and
  • Special Coverage.

Read more about types of coverage for home policies here.

How does coverage work?

It's helpful to know not only what your policy covers, but also how coverage will work if something actually goes wrong. 

insurance payout for covered perils

First and foremost, you'll get an insurance payout only for covered perils. If the loss is caused by something not covered by your homeowner's policy, you won't be able to make a claim.

Many homeowners insurance policies exclude flood damage, for example -- so if your home floods, you won't receive any compensation from your homeowners insurer.

We strongly suggest everyone buys a flood policy, even if you don't "Technically" live in a flood zone. 

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Compensation for policy limits

You'll also be compensated only up to policy limits.

If you have $25,000 in coverage for personal property, the most your insurance policy will pay out is $25,000 if every bit of your property is destroyed.

Make sure you have sufficient coverage and that your policy limits aren't set too low; otherwise, you'll have large out-of-pocket losses.

Look closely at your policy, too, as there are sometimes limits on coverage for specific items.

For example, even if you have $25,000 in coverage for personal property, you may be limited to $2,500 in coverage specifically for jewelry -- unless you buy an additional rider to cover your expensive baubles. 

Your coverage may also be limited if you have actual value, or depreciated cost coverage instead of replacement cost coverage. If you have actual value or depreciated cost coverage, you'll only be compensated actual value or depreciated cost instead of replacement cost.

If your house is worth $100,000 on the open market but would cost $300,000 to rebuild because it's has custom details, you'd absolutely make sure you have replacement cost coverage, which compensates you for the amount it takes to restore you to the position you were in before the covered peril occurred.

We always recommend replacement cost policies vs. Actual Cash Value OR Depreciated cost. It just doesn't make sense for most people to carry an actual cash value policy. 

you're responsible for covering the deductible

Finally, you need to be aware you're responsible for covering the deductible before your insurance will pay for losses.

If you have a $2,500 deductible, you'd have to pay for the first $2,500 in damage from a covered peril before your insurance would give you any cash, or make sure your damage exceeds the deductible.

Then you would get a check for depreciated cost - deductible. Once you actually prove you replaced/repaired the lost items you would then receive the difference or replacement cost. 

Home Insurance | Our Services | Thimmesch Kastner Insurance | Lafayette LA

You can pay less for Home insurance!

Keeping these tips in mind can help you reduce your rates and save hundreds of dollars.

Whether by purchasing rate-reducing devices, checking off premium-slashing life milestones, or putting in some elbow grease to keep your auto insurance costs down, you can have more money to spend on a swanky vacation or paying down debts.

Schedule a consult with TK Insurance today!

If you find your policy isn't providing the protection you need, talk with your insurance agent or broker about getting more coverage.

Premiums will be higher if you opt for higher policy limits, broader protection, or a lower deductible, but paying slightly more for coverage may be worth the peace of mind you'll achieve. 

Interested in how to save more on home insurance? 

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ABOUT Thimmesch Kastner Insurance

thimmesch-kastnerThimmesch Kastner Insurance is a full service insurance broker based in Lafayette, LA. We offer a variety of insurance products, and will work closely with you to explain all of your options, and coverage’s. We listen to your needs, and develop a customized portfolio for your lifestyle. We offer home, car and auto, liability (Umbrella), health, life, commercial (business), motorcycle, ATV, UTV, RV, and Boat Insurance and Cyber Insurance. 

Lafayette Insurance, affordable insurance, truck insurance, auto insurance lafayette la, commercial insurance, commercial insurance louisiana, marine insurance, hull insurance

Topics: Homeowner, insurance, Lafayette, LA Home Insurance

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