Home Insurance FAQ

shutterstock_158233841Home Insurance Frequently Asked Questions

  • If I have homeowners insurance, what am I covered for?
  • What is replacement cost vs. actual cash value
  • Why is the coverage for my house higher than the market value?
  • How to I save money on my homeowners insurance?

 

If you have homeowner’s insurance what are you really covered for?

Chances are you are covering:

  • Dwelling – The structure of your home
  • Detached Structures – A separate shop, garage, fence, etc…
  • Personal Property – Your personal possessions (not all possessions are covered under this section.  There are specific limits for guns, jewelry, money, etc… Which must be listed separately to insure their full value)?
  • Loss of use – The cost of living while your home is not habitable due to a covered loss.
  • Personal liability – The coverage that helps protect you and the members of your home against lawsuits.
  • Medical Payments – The coverage that will cover medical expenses that arise when someone is injured on your property.

What is replacement cost vs. actual cash value?

Replacement cost on your home and or contents is simply replacing what you had with something of the same like, kind, and quality without subtracting depreciation from the value.

Actual cash value on your home or contents is a depreciated value.

Here is an example:  You purchased a leather couch for $2000 back in 2002 and there was a fire in your home that destroyed the couch in 2012.

With replacement cost coverage, you would be able to go shopping and select a new leather sofa of the same like, kind, and quality.  With actual cash value coverage, you would the depreciated value of your used sofa from 2002 to 2012; which could be very minimal.  Perhaps you only get $30 to replace your sofa.

Why is the coverage for my house higher than the market value?

Frequently we are asked why home insurance is higher than the value of the home itself.  Here is the answer…  Insurance on your home covers the costs associated with rebuilding your home not what the home would sell for.  When calculating the cost to rebuild your home, several aspects are taken into account.  To name a few, we look at your location, the size, and what features you have in your home (granite countertops, jetted bath tubs, etc…).  We also take into account that replacing your home requires the use of brand new materials and labor costs for someone to do the construction.

How to I save money on my homeowners insurance?

  • Bundling – insurance companies frequently offer discounts for bundling your insurance with the same company.
  • Location – the closer your home is to a fire station and fire hydrants the better.  This allows the fire department to respond more quickly.
  • Safety First – Having dead bolts on your doors, smoke detectors, interior sprinkler systems, or burglar alarms could provide you with discounts.
  • Good Credit – believe it or not good credit is a sign or responsibility and insurance carriers believe it is an important factor.
  • Check Your Policy – many insurance companies include an inflation guard on your policy; which can result in your coverage increasing.  Call your agent to make sure your home is valued correctly.
  • Maximize Discounts – there are several discounts out there.  Make sure you are taking advantage of them!