Homeowners/Fire Insurance Basics
There are two types of homeowner policies – those that cover “all risks” of loss and those that cover only the “named perils” set forth in the policy. Most policies come under the first category which insures all risks of loss to your home. However, these policies list numerous exclusions and limitations that severely limit the coverage. Thus when one is trying to determine whether there is coverage for a loss to your home or property the starting point might be to look at the numerous limitations and exclusions in the policy.
Often there will be more than one cause of the loss or damage to your property. Many times one of the causes will be a covered loss and another cause will be an excluded cause of loss. In these situations the damages will be covered under the policy if the covered loss is the predominant cause of the loss.
After determining whether there is coverage, the next question is to determine how much the insurance company will pay to cover your losses. There are various types of coverage one may purchase ranging from guaranteed replacement coverage which requires the insurer to pay the entire cost of repair or replacement regardless of the limits of coverage stated on the policy to coverage that only pays up to the stated limits of coverage in the policy.
If the homeowners bought “full replacement coverage” and the company later limited that coverage to a certain percentage of the insured value, the reduction is not valid unless the insurance company gave the homeowners “clear and conspicuous notice” that it was reducing coverage. Read those annual amendments to your policy to see how your coverage is being reduced by the insurance company.