Insurance

The 6 Most Common Parts of
A Homeowners Policy

All homeowners insurance policies are not alike. They pay varying amounts of coverage to replace your home and personal belongings.

Look at the 6 Parts of a Homeowner's Policy:

Dwelling
Other Structures

Personal Property

Loss of Use

Personal Liability

Medical Payments

The 3 most common levels of coverage are:

  1. Actual Cash Value
    Your house or property is covered for the depreciated amount of the actual value at the time of loss.

  2. Extended Replacement Cost
    Your house or property is covered up to a specified amount or cap. For example, assume the dwelling coverage in a policy is $100,000 and it has a $150,000 cap. If there were a fire and it was determined at the time of loss that the home needed to be rebuilt, then extended replacement cost coverage might pay up to $150,000 of rebuilding costs.

  3. Guaranteed Replacement
    There's no cap or maximum pay-out amount on guaranteed replacement coverage. For example, assume a home was originally worth $100,000. But over the years, the owner makes unique design, decorating and style changes that make the home worth $250,000. If the home was destroyed in a fire guaranteed replacement coverage would enable the owner to restore the home to its $250,000 condition. This type of coverage may cost more, but it provides the most protection.

Most Insurance Companies recommend Guaranteed Replacement Coverage (when available).

Some also recommend inflation protection. This clause or endorsement annually adjusts your homeowners insurance policy to account for increases in rebuilding costs, as determined by the industry's inflation statistics, if there were a loss.

How much insurance do you really need?

If your home and belongings are damaged or destroyed, you don't want to be under-insured. You don't want to pay for insurance you don't need, either.

Obtain quotes from several insurance companies to determine an estimate of the cost to replace your home.

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