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When you compare home insurance rates, you'll be asked to set limits on your benefits. If you set the wrong limits, you could set your family up for financial problems in the future after an unforeseen, insurable event.
What are limits?
Your limits indicate the maximum amount of insurance your insurer will pay out in the event that your home is completely destroyed. So, if your limit is $500,000 for dwelling and your home is completely destroyed after a fire and needs to be rebuilt, $500,000 is the maximum you can receive.
What does it matter?
If you accept limits that are too low, you might not receive adequate financial resources to restore your family to its former manner of living after an insurable incident. You may need to sell your property and move to a more affordable location. This could result in changing schools, changing jobs, and losing some of your investment.
Be sure to get your home appraised before you apply for a home insurance policy. That way, you can compare rates based on a realistic limit, rather than one that will not make you whole after a loss.
|Jennifer Mathes, Ph.D.|