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Homeowners Insurance

Shopping for home insurance involves much more than finding out how much your insurance coverage will cost. The right type of insurance policy is crucial. You need the proper level of insurance protection for your home, plus special provisions for valuables such as jewelry, computer equipment and other possessions. You may want to consider additional insurance coverage for such things as earthquakes or flooding.

Mortgage companies usually require their customers to purchase homeowners insurance. The insurance coverage levels required by your bank or mortgage company are usually inadequate to cover your home and possessions. The required insurance coverage levels usually cover the home only. It’s important to talk with your insurance agent to be sure you have adequate coverage.

The premiums for a homeowners insurance policy vary depending on the age of your home, the materials used to build it, the location, the square footage, and the number of rooms. Other considerations are: how the home is heated, overall condition of the house, how many people reside there, how close the nearest fire station and hydrant is, security systems, etc. The answers to these questions will determine the premium you will pay for homeowners insurance.

If the insurance coverage for your home is $100,000, that is the most you will be paid if your home is completely destroyed even if it costs you more than $100,000 to replace it. The Declarations Page on the front of your insurance policy shows how much coverage you have. It is wise to discuss your coverage with your insurance agent and be sure you understand what you will be paid in the event of a total loss.

Before buying a home owner’s insurance policy, you need to understand the difference between ‘replacement cost’ and ‘actual cash value,’” Most home owner insurance policies contain replacement cost coverage on the home and actual cash value coverage on personal property.

Home owners policies cover household contents - furniture, clothes, appliances, etc. - up to 40 percent of the amount your house is insured for. If you insure your house for $100,000, its contents are insured for up to $40,000. More coverage is available at a higher insurance premium. This coverage pays only the actual cash value of damaged, stolen, or destroyed household goods. Actual cash value is an item's replacement cost, minus depreciation.

Replacement cost insurance policies give you more protection than actual cash value policies do. If your 3 year old computer equipment is stolen, with actual cash value coverage, you will get only what you would expect to pay for a 3 year old computer equipment. With replacement cost coverage, the insurance company pays to replace your computer equipment with equipment similar to what you lost.


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