Insurance can be very confusing to the everyday homeowner and there are so many insurance terms and jargon that one needs to wade through to be sure that they are fully protected in the event of a catastrophic or even partial loss. Today, I want to walk you through a couple of areas of insurance that are bound to help you understand what “proper” coverage means. What follows are some simple questions and answers to inform you.
1. Do you have your home insured for enought to rebuild it if you suffere a total loss? Too often a homeowner seeks to insure their home for market value and this is NOT the right approach. You should insure your home for the cost to rebuild it (replace it). This is rarely going to be the same as the market value. As construction prices increase, what it cost to rebuild your home may be more than the market value!! it is quite common for a homeowner to have their house underinsured. If a housing market is hot, then the cost to rebuild may actually be less than the market value of the home. Find an agent you can trust who will help you determine the proper coverage to rebuild your home in the event of a loss. Many people are concerned about insuring their home for the proper amount because they want to save money; however, the reality is that the financial difference is often very little when it comes to real dollars in premium.
2. Do you kow that your insurance does NOT cover earthquake or flooding? Coverage for earthquake and flood insurance is NOT included in most basic homeowner’s policies. If you live in an area where this is a concern, be sure and ask your agent about endorsements or coverage to protect you from these losses.
3. Do you know the difference between replacement cost and actual cash value? When it comes to insuring the contents of your home, it is critical you understand these terms and what they do for you in the event of a loss.
Replacement cost policies give you more protection than actual cash value coverage. For example, let’s say you have a five-year old plasma TV and it is destroyed by lightening. With actual cash value coverage, you get only what you would expect to pay for a five-year-old television set. With replacement cost coverage, the insurance company pays to replace your TV with a new set similar to the destroyed one. Hence, be sure you have your contents insured for replacement cost and not actual cash value!!
If you need to adjust your coverage to protect your home or contents in the event of a partial or total loss, please come by and see one of our agents today!