Busting Myths Surrounding Real Estate Insurance Ambiguity

March 2, 2023

Real estate finances, in general, are tricky, and so are several insurance claims and policies for homeowners. Some policies are designed ambiguously on purpose to lead you in error. Other times, the insured party needs to learn how to proceed with an insurance claim.

Let us explain why some (still) popular myths don’t stand up to scrutiny. We will also cover (no pun intended) the main stages of submitting an insurance claim.

Turn to financial experts with your questions instead of your friends!

Suppose you’ve given financing your home for the first time a serious thought. Sonn, you might find yourself lost in the labyrinth of real estate finance, working with complex terminology.

In this case, you might fall into the trap of addressing your inquiries to a friend or neighbor instead of an expert local real estate agent or an established advisor on home finances. You may risk obtaining false or ambiguous information about real estate insurance when you least need it by choosing the first option!

What happens when you have an ambiguous insurance contract?

Truth be told, seldom do homeowners read the insurance policy before signing. Generally, people believe the charging limits could be more transparent and less ambiguous.

One thing is sure: they can’t charge you too much. Each US state has a department of insurance that approves insurance rates. Besides, they prescribe that companies notify their clients several weeks before changing their premiums.

Suppose your insurance case ends up in court. If the judge finds your homeowners’ contract to be the least ambiguous, they will decide in your favor.

Myth Nr. 1: Property and liability coverage is the same.

Property coverage refers to scenarios when bad things happen to your house and personal property. For example, you can insure your jewelry, furs, and money. In addition, property claims cover other structures, such as your shed, pool, garage, etc.

Did you know that property coverage often implies that your insurance company will accommodate you in a hotel for a certain period? (If the complete rebuilding of your home is required.)

On the other hand, liability coverage on your homeowner policy implies that you’re directly responsible for bad thighs happening to other people.

Myth Nr. 1. A: Why would you need a unique umbrella liability policy?

A personal umbrella policy is an additional liability insurance policy to the main one. We recommend this if you own several properties and offer coverage for every real estate in the case of an unfortunate occurrence.

Suppose you have a lawsuit to deal with. Then, the chances are that your expenses will top your homeowner policy’s liability coverage. Thus, you may end up terminating your savings. In extreme cases, you may lose control of the situation and face foreclosure.

Myth Nr. 2: Being needy, hysterical, and entitled is the way to submit your claim.

Try to keep calm and focus on the tasks at hand. Typically, claims are submitted due to water damage and natural catastrophes, such as a tornado or fires. Ensure you document everything, and take pictures and videos! The claim adjuster will request evidence for your claim process.

Refrain from being too demanding when calling your company! Instead of enlisting the mishappenings that befell you, try to stick to the point! Request a claim number, the adjuster’s contact, and when to expect their call. Calling them repeatedly won’t facilitate the procedure!

Myth Nr. 2. A: Treat the claim adjuster as your enemy!

Consider treating the claim adjuster as your new closest friend. After all, they deliver the answer to what your insurance covers and decide your claim’s outcome! In short, they will inspect the property and compile a report determining the cause of loss.

Then, the adjuster will decide whether the company can give you money to cover your damage based on your cause of loss and insurance policy terms.

Myth Nr. 3: Picking the first remediation contractor who comes your way.

A classic mistake is hiring a counterproductive restoration service. Ask your insurance agent about the right team instead! They will recommend a licensed remediation (fire and water) specialist responsible for cleaning up the damage. Regularly, they’ll become your general contractor who will rebuild your home.

Or, search online for restoration services that received positive feedback and have plenty of referrals and not some “no-name“ handymen.

Myth Nr. 4: Extra policies added to your insurance are money thrown out.

Suppose you don’t wish to spend too much money on your insurance. However, this decision can backfire when you need coverage the most. You may wonder what’s the difference between replacement cost and ACV. A replacement cost policy added to your insurance will help you replace damaged goods properly.

On the other hand, suppose you have only basic ACV (Actual Cash Value) homeowners insurance. You won’t receive the money to restore or replace your home’s damaged parts. Also, you can choose a deductible sum to the homeowner’s policy to reduce your premium. The sum varies in each case.

Myth Nr. 5: You don’t need to consider the policy limit!

The insurance company will finance you to replace damaged personal property or even rebuild your house. Nevertheless, many insured people disregard their policy limit. It would be best if you looked into how much your policy entitles you to claim.

Suppose you have a policy that entitles you to insurance for $200,000. But, the actual renovation will cost you $250,000. In that case, many insurance policies will stop at $200,000. It’s up to you to provide for the remaining $50,000 yourself.

Myth Nr. 6: You can make a residual income based on your insurance.

And let’s address the hottest inquiry! Can you make money off your insurance claim? Your home insurance policy explicitly states that you, as the rightful owner, can’t profit from the insurance claim in any shape or form. The company will ensure that you use their check for the renovation purposes requested in your claim.

However, if you still have some pocket money left after the documented reparations (and your company doesn’t demand it back), you can keep it.

Final thoughts

A home insurance policy will cover all your personal property and house damages. Suppose you believe your real estate is exposed to various harms. In that case, we recommend you add additional policies, such as an umbrella liability insurance policy.

Moreover, you may find a blurry section in your policy. In that case, the best course of action is to contact your insurance company and have them explain all the ambiguous parts to you.

 

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Carlos Diaz
I believe in making the impossible possible because there’s no fun in giving up. Travel, design, fashion and current trends in the field of industrial construction are topics that I enjoy writing about.

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