Understanding Fire Insurance Policies
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One of the best investments you could ever make is the purchase of a fire insurance policy. However, the complexity of the detailed forms, and the terms used in the insurance field are not always user-friendly. Understanding your house fire insurance policy is important. The following definitions of insurance terms may be helpful to you:
Arson: A criminal act consisting of setting fire (or an attempt to set fire) to a property.
Cash Value: The value of an item in its used condition - not necessarily the item’s estimated cost new.
Construction Type: The material used in the construction of the property, such as brick, wood, etc. As brick is less combustible than wood, a person who owns a brick house may pay lower rates than that of a person who owns a house of wood.
Coverage: The financial protection that your policy dictates against certain types of damage or loss.
Deductible: The amount you agree to absorb when you file your claim.
Insurance Premium: The amount you agree to pay each month for the insurance coverage. On the policy declaration, this amount should be broken down to indicate the portions allotted to the various specific coverage.
Perils: The cause of the loss or damage, such as fire, smoke damage, etc.
Policy Declaration: This section, usually on the first page of your insurance package, specifies your monthly payments, coverage, policy limits, and deductible.
Policy Limits: The maximum amount of financial protection that could be awarded to you in the event of loss or damage. If your house, excluding its contents, is worth $500,000 and your policy limit is $500,000, you will not be covered for any contents within the house that have been destroyed or damaged. Always ensure that the policy limit is sufficient to fully cover your loss.
If you have questions, or if something regarding your insurance policy is not clear to you, don’t be afraid to ask your agent. Being informed and educated could very well grant you the maximum payout in the event of disaster. Fire insurance policies, when handled correctly, can give you and your family the ease of knowing that, should tragedy strike, you will be taken care of.