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Basic Forms Of Home Owners Insurance
Custom Value Policy
Custom value, or Market Value, and replacement value policies are the two basic forms of home owners insurance on the market today. These policy options may be referred to as slightly different terms by an agent or insurance company. Essentially, the difference relates to how you would be paid in the event of a loss and how you are insuring your home's actual value. The custom value or market value plan covers your home for a set dollar amount based on the home's approximate market value. For example, if you purchased and insured your home for $100,000 under this type of policy and later it was destroyed in a fire, you would receive $100,000 payout that you would use to purchase another home. Unfortunately, this type of policy does not provide enough coverage to replace the home or build a new one identical to the first.
Replacement Policy
The replacement policy covers your home for the amount it would cost to build another home identical to your current home to replace it in event of a total loss. When insuring a new home or a home in excellent condition, this type of coverage is most commonly preferred. Obviously, the rates per $1,000 of coverage are different for the two kinds of coverage, so it's important to talk with your agent about the options available to you based on the kind of home you own and your budget. Many factors, including the home's age, general condition, and maintenance come into play.
Insuring Your Personal Possesions
In addition to dollar value coverage for your home itself, your personal possessions or the contents of your home, garage, and other buildings on your property should also be insured. Most plans automatically assign a percentage of the home's insured value as the limit for the personal possessions. Most home owners policies automatically provide personal property coverage at 75% of the value of the home coverage. In other words, if the home is insured for $100,000, then its contents are insured for $75,000. Other policies may automatically provide personal property coverage at 50% of the home's value or some other percentage, so be sure to check.
Do You Have Adequate Coverage?
Sometimes the automatic coverage included in the package may not be adequate for your needs so make sure to check with your agent. Don't assume. Make an inventory of the contents of your home and calculate the cost to replace all those possessions in the event of a fire. When you start to add up the cost of furniture, clothing, dishes, curtains, rugs, books, jewelry, and other personal possessions, it can often exceed the figure specified in your policy. In this case, you will want to purchase additional personal property coverage so that you actually can replace those possessions in the event of a loss.
Limits On Coverage
Most home owners policies also have a cap or limit on the coverage for certain specific items like jewelry, guns, collectibles, computer equipment, and other special items. Pay particular attention to these limits. If the value of the jewelry, guns, collectibles, or other items you actually own exceed the limit, you will want to purchase an additional rider (additional coverage) to your policy to insure those items for their actual value so you will be adequately covered in the event of a loss. Some specific items such as home based business equipment and inventory and liability risks with a home-based business may not be covered under a typical home owners insurance policy and also require additional riders to be sure you have all your risks covered.
Choosing An Agent
There are many things you may need to consider before choosing an insurance agent:- Talk with a trusted representative who is knowledgeable about all the options available and can explain them in greater detail to you to make certain you are adequately covered.
- Read the fine print and ask plenty of questions to be sure you select the coverage that adequately protects you and your home.
- Make sure you find an insurance agent who doesn't just "sell" you a policy, but asks you what your needs and concerns are regarding home owners insurance.
- Your agent should ask you how much your home is worth and how much your contents of your home (your furniture, jewelry, electronics, clothing, and other personal possessions) would cost to replace in event of a total loss.
- A good insurance agent is more than a salesperson. A good insurance agent is a good consultant who puts your best interests first.
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