For most people, the purchase of a home represents the largest single asset that they will own. Insuring it against potential loss then becomes critically important. You should know that homeowners insurance is one of the broadest types of risk coverage you can buy. In general, it covers the roof over your head, the shirt on your back and yes, even the kitchen sink! Homeowners insurance also protects you, your family members and your pets, if someone else is hurt at your home or away from it. But, most people don't have any idea what is covered in their policy and maybe even more importantly what isn't covered.
With about 900 insurance companies writing property/casualty policies in the United States, individual homeowners policies vary. However, 80 percent of homeowners policies are based on a standard form, and all homeowners policies cover two important areas: property and liability. Moreover, your policy may cover you for additional living expenses should your home not be livable for a period of time due to a covered peril.
At a minimum, homeowners insurance usually covers damage caused by:
- Fire or lightning
- Windstorm or hail
- Theft or vandalism
- Falling objects
- Weight of ice, snow or sleet
- Freezing of a plumbing, heating, air conditioning or other such household system
State laws may dictate how losses are to be figured, which means the same insurance company may use one method in one state and a different method in another. The common methods are:
- Actual Cash Value - The replacement cost of the item minus depreciation. For example, a new television set may cost $500. But if your 7year-old TV set gets damaged in a fire, it might have depreciated 50 percent prior to the damage. Therefore, you would be paid $250 for that set.
- Replacement Coverage - The cost of replacing an item without deducting for depreciation, but limited to a maximum dollar amount. Today's cost for a TV set with features similar to the 7-year-old one damaged by fire would determine the amount of compensation. If it still costs $500 today, that would be the replacement coverage. (It's important to remember that there are limits on this policy and you need to keep up-to-date on your coverage).
- Extended Replacement Cost - An extended replacement cost policy, one that covers costs up to a certain percentage over the limit (usually 20%). This gives you protection against such things as a sudden increase in construction costs.
Important Note: Replacement value should not be confused with market value. The market value is what your house, for example, would actually sell for and is generally more than the replacement cost. This is because replacement value does not include the land-which almost always does not need to be replaced.
Standard homeowners insurance doesn’t cover flood damage at all. It’ll cover some damage from rain, but if your home is filled with water as a result of rising bodies of lakes, rivers, streams, and oceans, it won’t cover you. The most common flood insurance is offered through the federally regulated program known as the National Flood Insurance Program (NFIP).
Contact us or fill out our convenient quote form online now and we will help you find the best Home Insurance coverage for you.