Take care when buying insurance for your home

You bought a new home, and you naturally got insurance for it. Now, can you enjoy a worry-free future? Not quite. Home insurance is not the answer to all your prayers. Too many homeowners have encountered problems when they need to make a claim on their insurance.

All home insurances are not equal. There are eight different categories of coverage. Some are for specific circumstances only, such as if you rent or live in a mobile home or a heritage home. 

Although there are other categories available, most homeowners need to select from one of the following types of homeowners insurance: HO-1, HO-2, HO-3 and HO-5. Categories one and two only cover the events they explicitly state. That is to say, if it is not on the list, your policy will not cover you for it. 

Policies in category HO-3 and HO-5 take a different approach: they cover everything except what the wording says it excludes. So if it is not on the list, you should be covered.

Depending upon your policy, you may or may not get what you need to replace or repair your house or any damage to it. Policies agree to pay in three ways:

  • Cash value coverage: Your 10-year-old conservatory collapses. You will get what it cost you, minus ten years of depreciation.
  • Replacement cost coverage: You will get what you paid for your conservatory without depreciation. However, building a new one will likely cost you more than it did 10 years ago, so you will have to come up with the extra yourself.
  • Extended coverage: You will get enough to construct a new conservatory at today’s prices.

Companies offering homeowner insurance may look for ways to reduce the amount payable to you in a claim or to deny your request altogether. If you have a dispute with your insurance company, seek legal help to fight for the compensation you are due.

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