Homeowners insurance is certainly not something that most of us want to think about, let alone discuss, until we actually need it. However, understanding what is covered and what is not covered in your policy can actually make the difference of being able to rebuild your property and replace your personal belongings if a disaster happens to strike. That being stated, it is a good idea for homeowners to do an annual insurance policy check up in order to ensure that they are keeping up with local home remodeling costs, along with inventories of their personal items.
In most cases, your homeowner’s insurance policy covers damage that was caused by fire, windstorms, hailstorms, explosions, and water damage that excludes flooding. Other losses are typically covered such as the cost of living somewhere else while your home is being repaired or rebuilt, and theft of your belongings. Most policies also cover legal liabilities if other people are injured while visiting your home. The bottom line is that your homeowner’s insurance policy covers both the structure of your home, and your personal belongings that are located within your home. There are actually three (3) methods to insure the structure of your home. They are as follows….
In essence, replacement cost pays the policyholder the amount of money that it costs to replace the damage to the property. This occurs without a deduction or depreciation, however it is limited to a maximum amount based on the specific policy.
Extended Replacement Cost
In essence, extended replacement cost is just what it sounds like, an extended replacement cost policy that covers costs up to a particular percentage over the limit. Typically it is based on 20%. Extended replacement cost provides you with protection against occurrences such as an unexpected increase in construction costs.
Actual Cash Value
In essence, actual cash value covers the costs to replace aspects of your home minus a determined amount of depreciation costs based on both age and use. For example, if your 15-year-old roof is destroyed due to a fire, and the life expectancy of that roof is 20 years, the cost to replace it is significantly higher that the tangible cash value of the roof.
It is important to insure your home for the total amount that it would cost to rebuild it if completely destroyed. Keep in mind that number is not the actual market value, rather the cost to rebuild. Also keep in mind that if you fail to have adequate insurance, the amount may not actually cover the full costs of repairing or replacing the damaged items. The following tips will help to ensure that you have enough homeowner’s insurance coverage….
Tip #1: How To Estimate The Amount Needed To Rebuild Your Home
In order to estimate the amount needed to rebuild your home, multiply the local building costs by the total square footage of your home. Consult with your local builders association in order to figure out the building rates within your area. Please note that this is only an estimate that will provide you with a ballpark figure. Always consult with your insurance agent prior to making any changes to your policy.
To Be Continued….
It is important to fully understand exactly what you are purchasing when it comes to insurance policies. If you have any questions, please call (508) 831-0133 to contact an associate at Zawada Insurance. We are happy to walk you through the details of your insurance policies and explain your coverage options. We look forward to helping you with all of your personal and or business related insurance needs now and in the future.