Home Owner Insurance
Homeowners who know what kind of home
insurance coverage they need may be
able to save money on their monthly premiums. Homeowners can choose between
two types of home owner insurance coverage, actual cash value and replacement
cost.
Actual cash value home owner insurance covers the contents of a home for the
original value of any item, less a deduction for depreciation, age, or wear
and tear. The home
owner insurance company will pay the cash value of the item
at the time of the loss.
With replacement cost coverage on home contents, the homeowner is reimbursed
for the amount necessary to replace the destroyed item with one of the same
type and quality. This home insurance coverage is more expensive than actual
cash value coverage. Home owner insurance companies usually require an amount
of insurance equal to at least 80 percent of the full-replacement value of
the home. You can easily get a homeowner
insurance quote.
Common Homeowner Insurance Questions
In the event of a serious loss — let's say a fire destroys the house — how
would I fare?
In most cases, you want to insure your dwelling and its contents for their
replacement values, which will likely differ from the dwelling's market value
and your personal property's depreciated cash value. You also should probably
get a policy with automatic inflation adjustments so that the replacement cost
keeps pace with the general level of price increases. (Homes insured under
HO-8 policies are covered only for repair costs or actual cash values, since
replacing them would be so costly. Owners of such homes could always get replacement
insurance under another type of policy, but they'd probably pay pricey annual
premiums.)
Standard coverage normally insures your possessions at 50 percent of the value
of your dwelling. Many people boost this coverage to 70 or 75 percent with
additional protection. But there are still individual limits on certain types
of personal property (see below).
Free-standing structures on your property (garages, gazebos, tool sheds) are
also covered, with standard protection equal to 10 percent of your dwelling.
Trees and shrubbery normally can be replaced up to a limit of 5 percent of
your dwelling coverage. As is the case with your personal property, you should
assess your needs to determine if you want to pay extra amounts to increase
these levels of protection.
Also, pay attention to what might happen if you were to lose the use of your
home for an extended period. Loss-of-use provisions are important elements
of homeowners policies, and coverage levels equal to 30 percent or more of
your dwelling's insurance aren't unusual.
If someone who is not covered on my health insurance was to suffer a serious
injury in my home, and I was found liable, how would I fare?
The standard level of liability protection in homeowners policies has been
$100,000 but it's rising all the time. Today, $300,000 is not an uncommon amount,
and even higher levels are recommended for affluent homeowners with lots of
assets to protect. In this situation, "umbrella" policies have become
popular. These policies provide excess liability coverage on both your homeowners
and automobile policies, and are not that expensive (you normally need to carry
both underlying policies with the same insurer).
What if I have certain possessions — computer equipment, cameras, jewelry — whose
replacement values far surpass normal coverage limits in my policy?
Standard policies may not come near covering the replacement costs of even
moderate amounts of home electronics hardware or expensive possessions. For
relatively small amounts, you can purchase "floaters" that will add
protection to certain items of personal property.
In addition, equipment related to a home-based business will not be satisfactorily
covered unless you obtain a separate commercial policy.
Can I get a high deductible, say $1,000, in order to save money on the policy?
The differences in annual premiums between policies with deductibles of $250
(you pay the first $250 of damage, the insurer pays the rest), $500, and
$1,000 may easily be worth 20 to 30 percent of the annual premium. So, if
you can afford the expenditure, and want to place a small bet that you won't
face a home-related loss, consider a larger deductible.
What other protections does my policy provide?
Homeowners policies regularly provide other types of coverage, including off-premises
theft protection and unauthorized use of your credit cards. Make sure you
understand which provisions are included in the standard coverage you elect
to purchase and which may require supplemental premiums.
|
