Limits Placed On House Insurance Policy Cover

You select the level of coverage which you need on your homeowners insurance policy and the limits selected, along with the deductible on the policy, will determine how much the premium on your policy is going to be.

When selecting the level of coverage you need you need to consider carefully what your policy will pay in the event of a claim and we cover this when dealing with the different types of property insurance policy cover. Having said this, certain aspects of your policy will depend on the total sum insured for your dwelling. As an example, it is usual for policies to pay out 10% of the dwelling coverage limit for other structures, 50% in respect of personal possessions and 20% for the loss of use of your home.

In addition, there will often be specific limits for the replacement of high value items and if you want cover for those items then you will need to pay an additional sum for an endorsement or floater (also referred to as a rider) to your policy.

In general you will need to pay extra for the following:

High value items such as jewelry, furs and silverware

PCs and other home office equipment

Waterbeds

Business assets if your business is being run in your home

Hurricane, earthquake and flood damage (depending on location)

You ought to review the limits on your policy at least once a year and want to make sure that it does not drop to a figure of less than 80% of your property's replacement cost. If it does drop below this sum then your insurance company may reduce the amount that it is willing to pay out on a claim.

Notes:

The market value of your property and its replacement cost are not the same figure and you need to insure your home for its replacement cost and not its market value.

The deductible on a policy is the sum of money which you pay out-of-pocket for a claim before your policy kicks in to settle the claim. The larger the deductible the less the insurance company will need to pay and so the lower your policy premium.