Have you ever sat down and tried to read a book that was written in a language you didn’t speak-at all? Doesn’t trying to read your homeowner’s insurance policy give you that same warm, fuzzy feeling of frustration every once in a while? As astonishing as it may seem to those people out there that like to make sure their i’s are dotted and their t’s are crossed, there are thousands of homeowners that have no idea what their homeowner’s insurance policy says because trying to read through it with a dictionary in one hand and an anxious agent leaning over their shoulder is too much trouble.

Because not understanding the terms of your homeowner’s insurance almost inevitably ends up in you paying far more in bills, premiums and deductibles than you should, it’s important that you read through and make sure you understand all the terms of your contract before signing on the dotted line. Relax, your insurance agent hasn’t got anything better to do. If they did they’d go do it and let you read in peace!

The first thing you need to know about your policy is exactly what is covered. A standard insurance policy will provide coverage in the event of fire, lightning, windstorm, hail, vandalism, malicious mischief, theft, vehicle and aircraft collision (try not to think about the logistics of that one too hard-just accept that it’s important), explosion, riot, civil commotion and smoke. Anything else is usually considered optional-and that includes flood and earthquake damages.

If you’ve seen season 5 of the television series House, M.D., you already know what kind of havoc not understanding the terms of your homeowner’s insurance policy can inspire. (Season 5 episode “Painless”, if you’re interested.) Insisting that your insurance policy should cover something it doesn’t or not realizing that it covers something it does can cost you thousands in repair bills (or bribery costs, depending on how desperate you are to “stick it to the man”).

The second thing you need to know is how, exactly, you’re going to be reimbursed. Most homeowners prefer to have a replacement cost homeowner’s insurance policy, which will cover the cost of purchasing a new (insert name of item here) if it is damaged or stolen without taking daily wear and tear into account. Actual cost value will only reimburse you for the item’s value at the time of the loss, and it is usually far less than you’re going to pay to buy another one. A replacement cost policy may have a slightly higher premium, but it’s usually worth the investment.

Finally, it’s important to make sure that you understand your deductibles (how much you’re going to be expected to pay before your homeowner’s insurance will reimburse you when a claim is filed). Many homeowners find themselves surprised to discover how much they owe after a claim is filed, and often that turns out to be the straw that breaks the camel’s back in an already stressful situation. You can avoid that frustration and aggravation by familiarizing yourself with the terms of your policy beforehand.

Knowing what’s in your homeowner’s insurance policy before you sign on the bottom line isn’t just good business, it’s good sense. Don’t be afraid to take the time to sit down and make sure you understand your policy before you find yourself holding the bag on bills you really don’t need.

Repost from 2014