Stuffed with industry jargon and legalese, your home insurance policy isn’t exactly light reading — but that doesn’t mean you should toss it in a drawer without a glance. After all, the words in that policy could mean the difference between being completely covered for a disaster or having to pay thousands of dollars to repair your home.
Below are a few key terms to look for when skimming your homeowners policy, plus tips on where to find the most essential information.
“The good news is even though policies can be dozens of pages long ... the most important terminology and coverage amounts are located in the beginning on the declarations page,” says Landy Liu, general manager of insurance products at Better, an online mortgage provider.
The declarations page is customized for your home and spells out details such as the property address, coverage amounts, premium and discounts that have been applied.
Check the declarations carefully to make sure everything looks correct, advises Steve Wilson, senior underwriting manager at Hippo Insurance. If it doesn't, contact your agent or carrier.
Another key detail to look out for on the declarations page: deductibles. This is the amount you’re responsible for in the event of a claim.
Say a thunderstorm blows a tree onto your house, causing $10,000 worth of damage. If your deductible is $1,000, the insurance company will pay $9,000 toward the cost of repairs.
Your declarations page may list more than one deductible, depending on the type of claim, says Angi Orbann, vice president of property and personal insurance at Travelers. If you live along the coast, for instance, you might have a hurricane deductible that’s higher than the one that applies to other claims.
Hurricane or windstorm deductibles often represent a percentage of your dwelling coverage rather than a flat amount, Joseph Sanzo, a property and casualty specialist at Barnum Benefit Advisors, said in an email. For example, if your home is insured for $250,000 and you have a hurricane deductible of 3%, you’d be responsible for the first $7,500 of damage after a hurricane.
Your declarations page will spell out how much coverage you have, but it typically won’t explain what isn’t covered. For that information, look for sections of your policy with headings like “exclusions” or “losses not insured.”
You’ll likely find lengthy lists of scenarios your insurance company won’t cover, including major disasters such as floods and earthquakes. If your home is at risk from these disasters, Orbann says, you can often purchase additional coverage.
“Be proactive and talk to your insurance carrier,” Wilson says. “Is this a flood-prone area? Are there other coverages that I may need?” An agent can identify potential coverage gaps and help you fill them.
One common way to address such gaps is through an endorsement, which changes or adds coverage to your policy.
For example, most standard homeowners insurance provides little to no coverage for damage from backed-up drains or sump pumps, but you can probably add this coverage through an endorsement, Wilson says.
Endorsements are typically listed separately from the main text of your policy, often at the end.
If you own valuable personal belongings — like a pricey engagement ring or extensive art collection — they may not be fully covered by a standard homeowners policy. Insurance companies often list “special limits,” or sublimits, for certain types of personal property, Orbann says.
For instance, jewelry theft might be covered only up to $1,000. Special limits often also apply to cash, silverware, furs, guns and items used for business purposes.
If you have belongings worth more than the sublimits in your policy, contact your agent or carrier to discuss adding extra coverage. An appraisal may be required.
The “conditions” sections of your policy are worth a look because they spell out how to get the coverage you’re entitled to. Wilson recommends reading these parts of your policy so you understand what you need to do when filing a claim. If you don’t meet the conditions, your claim could be denied.
Among other provisions for filing a claim, your policy might specify that you must:
- Protect your property from further damage after a disaster.
- Notify the police if your belongings are stolen.
- Provide an inventory of damaged or stolen belongings.
The conditions sections often have other essential information, such as reasons the company may cancel your policy.
Still confused about your homeowners insurance? An agent can help. “Speak with a professional, somebody that has your best interests in mind, to walk you through the specifics of your situation,” Liu says.