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Homeowners Insurance

01

Overview

02

Homeowner Policy

03

Helpful Terms & Tools

04

What’s Covered

Whats covered and whats not

There are many things that can happen to your home or to the people in your home. Some of these are covered under your policy and some are not – so if you don’t know what types of damages are covered, educate yourself. The first step is to look over your policy, but after you do that, you should ask your insurance company or agent to go over each coverage in detail. The peace of mind that comes with knowing what is (and isn’t) covered will be worth your time.

Traveler's Insurance Infographic

Impacts of Replacement Coverage:

Imagine you go on vacation and return to find that a burst water pipe in your kitchen has damaged all of the hardwood floors and carpet on your first floor living space. Several kitchen cabinets are also badly water damaged. You call your insurance agent and adjuster is sent to your home to survey the damage.

The adjuster determines that the cost to replace all of the flooring and other damaged items is $75,000.

If you have a policy that covers you for replacement cost, that means the flooring and lost items will be replaced with items of the same quality, same kind, at the current cost of materials.

The insurance company would thus calculate your payout at $75,000, less your policy’s deductible. In this case, let’s imagine you have a $3,000 deductible. Here’s what the equation looks like.

$75,000 – $3,000 = $72,000

Without replacement cost coverage, the insurance adjuster calculates a depreciation of $30,000 based on the age of the flooring and cabinets. The depreciated value is often called “actual cash value.” Depreciation is tough to calculate. There is no one formula to determine depreciation, so each adjuster likely has his or her own methods.

$75,000 – $30,000 Depreciation $45,000 – $3,000 Deductible $42,000

Four steps you can take RIGHT NOW:

01

Prepare a list of questions that you may need to ask your insurance professional. These can be things you want to find out now or things you want to cover when it is time to renew your policy.

02

Consult one of the Purse Strings approved professionals (it’s free), either for advice or for a recommendation (Purse Strings only recommends professionals who are reputable, honest, and who will listen to you and answer all of your questions).

03

Write down some things you want to look into further or things you want to consider now that you have more knowledge about homeowner’s insurance.

04

Make a to do list. Be sure to include things such as creating a home inventory or obtaining your CLUE report (see below).

Get a CLUE Report

Insurance companies share information via CLUE. Just like there are credit reporting agencies that track all of your consumer debt data and provide that information to banks and retailers, there is another database that stores information about any insurance claims you make. This database is called CLUE (Comprehensive Loss Underwriting Exchange).

Insurers consult this database before they offer you coverage. This database is maintained by an information vendor, not another insurance company. The database acronym is CLUE, which stands for Comprehensive Loss Underwriting Exchange.

If you want to know what your CLUE report says, you can obtain a copy.

  • If you are ever denied insurance because of data in your CLUE report, most states require the insurance company tell you how to obtain a free report.
  • You can also obtain a copy of your report once a year for free.
  • Be aware that it’s not very fast, but it is a straightforward process.
  • You can get your free claims history or CLUE report from LexisNexis, online at https://personalreports.lexisnexis.com/ or call (866) 3128076.
  • Or, ask your insurance agent if s/he can print a copy for you.
  • If there is no report for you, it just means you’ve filed no claims in the past seven years.

Tips & Tricks

Good insurance may seem expensive. It is the one bill you will pay your whole life! You may pay off your mortgage and your car, but will always—and should always—have good insurance coverage.

Homeowners Insurance is best used for catastrophic incidents. Some state a rule of thumb as one claim every ten years. Reporting many smaller claims will surely make your insurance premium increase. Many carriers may suggest carrying a higher deductible, which helps lower premiums and helps insurers determine how much risk they want to take on themselves. When filing a claim, it is good to weigh the cost of damages and then the fact that up to a 30% surcharge could go on your policy for up to 5 years.

Just like credit reporting agencies that track all of your consumer debt data and provide that information to banks and retailers, the CLUE database stores information about any insurance claims you make.

This Guide

01

Homeowners Insurance Part 1 - Overview

02

Homeowners Insurance Part 2 - Homeowner Policy

03

Homeowners Insurance Part 3 - Helpful Terms & Tools

04

Homeowners Insurance Part 4 - What’s Covered

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