5 questions Suze Orman needs to ask about your home insurance – the Motley Idiot

For most people, their home is the most valuable asset. Proper home insurance to protect these assets is critical – but many people don't have enough protection. Personal finance expert Suze Orman wants to change that. It asks every homeowner to take a close look at five specific home insurance topics.

1. Does the policy offer full replacement coverage?

Insurers offer two options for home protection (the type of insurance that covers the home): replacement coverage and market value insurance. The market value insurance pays for a damaged or destroyed apartment at the current market value. Replacement insurance pays off in order to rebuild the house to the way it was before the destruction.

Replacing a home can cost more than it's worth, especially if it has many special features that don't necessarily add to its market value. Orman believes that homeowners should typically purchase replacement insurance to ensure their property can be restored. Orman also recommends purchasing extended replacement coverage that pays up to 125% of the insurance value.

While everyone can choose to pay for additional protection for themselves, every homeowner should understand the difference between replacement and market value policies and what type of coverage they have. Those with market value coverage should understand that they run the risk of not being able to rebuild their current home.

2. Are the rebuilding costs correct?

Orman also advises homeowners to find out how much it would cost to rebuild their home and make sure their policy limits are not too low. The insurance limits are the maximum amount that the insurance will pay out. If the cost of rebuilding is not high enough, the insurer may not allocate enough money for repairs or rebuilding.

So how can homeowners tell if their policy limits are high enough? “The best way to get a solid estimate is to ask a local builder what the cost per square meter to build in your neighborhood,” suggests Orman on her blog.

3. Is there a build code upgrade included?

Homeowners should also check the guidelines to see if they include an update to the building codes. As Orman explains, this provides additional protection in the event the property needs to be repaired or remodeled and building codes have changed in the meantime.

If an apartment has to be brought up to date for repairs, the insurer cannot pay the additional costs without this protection. Property owners risk paying out of pocket.

4. Is the house insured against flooding?

Most standard home insurance policies exclude flood damage. Unfortunately, many homeowners don't know until it's too late. Hence, current and potential policyholders need to review the policy terms to see if they have flood protection in place. If a policy excludes this – like virtually all home contents insurance – having stand-alone flood insurance can be important if you live where floods occur.

Lenders sometimes require flood insurance for properties in flood areas. But homeowners who don't have credit or whose lenders don't need this protection aren't off the hook.

"While there is no legal requirement to take out flood insurance, I strongly recommend that you look into it if you live in a low-lying area or in an area prone to severe storms," ​​Orman suggests.

5. Is the house insured against wind and hurricane damage?

After all, wind and hurricane damage are often excluded from standard policies. Homeowners in areas with frequent high wind storms should review their coverage limits and consider purchasing a standalone policy.

By asking Orman Recommended questions, property owners can get the insurance coverage they need. Saving on home insurance can be a recipe for financial disaster. So find out more about your policy today.

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