Even a top-notch property insurance policy is unlikely to cover everything. The money you get is limited by the deductible on your policy, and by the coverage limits. It's a trade-off: the more money you can potentially collect, the more your premiums cost. A high deductible or a limited maximum coverage reduce the cost of your premiums.
Your deductible sets a floor for your property insurance coverage: if you have a $1,000 deductible, say, and $500 in losses, you eat the repair bill. If you have $10,000 in losses and the same deductible, you get $9,000 worth of claims money. The deductible comes off the amount of your loss, not the amount of your coverage. If, say, your policy pays up to $200,000, you have a $5,000 deductible and $205,000 in damage, you collect $200,000, not $195,000.
Applying limits is pretty basic: if you have, say, $100,000 in coverage, that's the most your insurer is going to pay you. What you have to watch for is that your policy may apply different limits to different kinds of property. If you have a $40,000 jewelry collection, for example, your $200,000 homeowners insurance may only pay $1,000 per piece of jewelry or $2,500 for the whole collection. To get around that, you need to buy special coverage for your jewelry.
When you have to file a claim, first get an estimate of the damage. If your roof collapsed during the last windstorm, for instance, contact a roofer and find out how much repairs will cost you. Subtract the deductible from the bill, then compare the result to your policy coverage. Anything that exceeds your policy limit is going to go uncovered. Below the limit, everything but your deductible should be covered.
Your insurance adjuster may not agree about how you apply your policy -- for example, by claiming your losses are below your deductible, so you get nothing. One solution is for each of you to hire an appraiser; if the appraisals don't match, an arbitrator will set the amount. Another alternative is to take the insurer to court and ask the judge for what you believe you're entitled to. There's a time limit on how long you have to sue, so don't miss the window.
- Forbes: The Smartest Homeowners Insurance Move: A $100,000 Deductible
- Merlin Law Group: When Calculating Insurance Payments, Take the Deductible From the Repair Value and Not the Policy Limits
- Allstate: Personal Property Coverage
- Merlin Law Group: The Umpire's Role in Texas Appraisals
- International Risk Management Institute: Property Insurance Suit Limitations Provisions: Pitfalls for the Unwary
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.