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Exercise 5 Cautions While Buying Home Insurance

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okeechobee home insuranceHome insurance is important because it saves you from heavy financial loss. Your home can be in danger because of various calamities like storm, fire, flood or earthquake. Will you afford seeing the home of your dreams, where you get mental peace and rest after a hectic day, being destroyed? With home insurance, you have at least a surety that you will get its compensation. However, you will also have to be very much cautious while buying home insurance. First of all, buy insurance from a reputable and reliable provider like Okeechobee Insurance, so that you won’t have to face undesired situations afterwards. Let us see what other cautions you can observe.

Know About Exclusions

Just while taking a superficial look at the offer document, you may think that the policy you are going to buy has all the coverage you need. But in fact it is not so. Insurance provider need to implement certain special policies so that the potential payouts can be minimized. Most of the basic insurance policies exclude coverage against floods, earthquakes and landslides.

Author of “Insurance for Dummies” Jack Hungelmann advises that homeowners should buy add-on policies to fill the gaps created by the exclusions and if your home is exposed to risks you certainly should consider coverage.

High Winds

There are two types of home policy deductibles, the first being all-peril deductibles, covering most mishaps, like thefts and fires and the second being a wind deductible for homes in windstorm or hurricane-prone areas.  In the wind deductibles there are two types – hurricane deductibles are for the coverage of damage caused by only hurricanes, while windstorm deductibles cover any type of wind damage, even hurricane.

Wind deductibles are either a fixed amount or a percentage of the insurance value. E.g. if your home is insured for $500,000 and 5% deductibles are applied, the amount of first $25,000 of a wind-associated claim should be paid from your own pocket.

Beware of ACC (Anti-Concurrent Causation Clause)

Read the document carefully to see whether it contains an anti-concurrent causation clause (ACC). This clause may restrict your claim or block it totally, if the home is insured against one of two concurrent clauses, like wind but not against the other like flood and it is damaged by both of them.  As far as possible, buy a policy without the ACC clause. If you cannot, get an add-on policy.

Be Prepared for Spikes in Rebuilding Costs

If your home is mortgaged, mostly your lender necessitates you to buy a homeowner’s insurance. Normally homeowners insure the home for an amount which is sufficient to replace it. Rebuilding costs include the costs of material and labor. In case of disasters like floods or storms, that destroy many structures across a single region, building material and labor are in high demand temporarily. This causes a spike in the rebuilding costs.

According to Amy Bach, executive director of consumer advocate group, United Policyholders, most of the insurance providers sell comprehensive coverage add-ons which increase the basic homeowner’s policy coverage to ensure you have sufficient money to rebuild.

To ensure you have sufficient insurance to cover a spike in building costs, get advice from a good insurance company, like Okeechobee Home Insurance.

Keep an Eye on Updates in Construction Regulations

If your house is badly damaged and should be repaired or replaced, construction upgrades may be required due to changes in building codes. E.g. the new code may need an increased height for your home if it is in flood-prone area. Regular policies may not cover such extra construction costs. In such a case you need to buy supplemental insurance to get a cover against such risks.

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