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Homeowners Limits

It’s not just a house, it’s your home. It’s a symbol of pride and one of your greatest investments. You can’t risk the financial devastation of paying for a large loss out of your own pocket and that’s why it’s so important to protect your home and its contents with the proper insurance. But how MUCH insurance is enough? The amount of insurance you purchase is usually called your POLICY LIMIT, or limit of coverage.

It’s the maximum amount your insurance company will pay for a particular loss, or losses. Each policy is unique and may include a variety of limits, so we’ll just focus on the common ones. First, let’s take a look at coverage for your property. With homeowners insurance you can purchase coverages to protect your home, your personal property, and other structures on your property. Most policies assign different limits to these, and the limits represent the total the company will pay for a loss. When deciding how much insurance is needed for their home, people often make the mistake of considering market value.

Instead, you should determine how much it would cost for you to rebuild your home if you had a total loss. Your insurance agent can help with this. They have replacement cost estimators that calculate the reconstruction cost for your home. When it comes to coverage for other structures, personal property, and Loss of Use, most standard homeowners policies will provide a percentage of the coverage you have on your home, which is called Coverage A.

So for instance, if the Coverage A amount for your home is $200,000, and your policy provides 10 percent of that amount for other structures on your property, you would have $20,000 worth of coverage available for other structures. Of course, you can always purchase more coverage than what your policy provides if it’s needed. This is why you’ll want to go over your individual needs with your agent.

They’ll work with you to examine which amount of coverage would best protect your property and possessions. Creating a household inventory, complete with video or photos that you store online or somewhere away from your home, is an ideal tool for making sure you have a complete and accurate list of your personal property. It will also help ensure your coverage amounts are sufficient. There may be special limits within your policy that you should be aware of. For example, in the personal property section, your policy might have a $1,500 limit for theft of unscheduled jewelry. What if you inherit grandma’s diamond ring and it’s valued at $5,000?

You’d only have protection up to $1,500 unless you had purchased higher limits after discussing your needs with your agent. Next, let’s take a look at Liability Limits. If you are found legally responsible for harm to someone else or their property, you will have to pay for the damages you caused. Liability insurance can help with that. When it comes to home insurance, most policies put bodily injury and property damage together under one limit, and call it Personal Liability.

This coverage pays for damages caused by you or your family members to other people or their property. Your agent can help you pick the appropriate limits for your Personal Liability coverage. Even when we simplify it, understanding your insurance policies is easier said than done.

That’s where your Independent Agent comes in! They are there to answer your questions and help you understand which coverages and limits you need to protect you and your family. To help you make the right choices, be sure to contact your local independent agent today!