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.
ANALYZING YOUR HOME
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.
INSURANCE POLICY DOLLAR AMOUNT
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.
REPLACEMENT COST COVERAGE FOR PERSONAL PROPERTY
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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