Homeowners Insurance: How To Get The Best Coverage And Value

What Homeowners' Insurance Generally Covers
Most home insurance policies cover liabilities relating to damage resulting from these causes: fire, lightning, wind, hail, riots, vehicles, airplanes, vandalism, malicious mischief, theft, volcanic eruptions, falling objects, ice, snow, sleet, heating system failure, cooling system failure, miscellaneous explosions, electrical system failure and plumbing failure. These types of damage are well-known in the insurance industry as being easy ones to plan for: they don't happen very often and it is easy to calculate the costs from their occurrence.

What's Covered
Make sure to read your policy carefully so that you understand your company's specific policies. Generally speaking, home insurance will cover damage to:

- the house itself, which includes any extensions and modifications such as an external garage - the outdoors area, including trees, swimming pools, etc - buildings on your property but not attached to your home like greenhouses, sheds, etc - any vacant land that you either own or rent, although most policies exclude farmland from this definition - family possessions - possessions owned by friends that were in your home at the time of disaster - cemetery plots

As well as:

- medical and legal expenses outstanding at the time of disaster - fraudulent checks or counterfeit currency accepted by you in good faith

Actual Cash Value Or Replacement Cost
These two terms refer to different methods of paying out the policy. Actual cash value or ACV means the cost of replacing damaged property and covered items with property and items of like kind and quality, less depreciation. The replacement cost is usually defined in the policy, and it means to replace the damaged property with other property of the same kind and quality for the same purpose.

Limits On Coverage
A homeowners' insurance policy has limits on how much of covered property and items the insurance company is willing to pay for. For instance, there are typically severe limits on personal property such as jewelry, cash, antiques, etc. You may have purchases theft coverage, but don't forget to check how much the company is willing to pay to cover the actual theft of items.

Policy Coverage To Consider
There are different types of coverage to purchase, and not all of them are always necessary. For example, a popular type of coverage is inflation guard where your insurance policy amount is increased to keep up with inflation. This allows you to replace your home in the event of a loss even if inflation has devalued it. Coverage can be purchased for secondary residences, as well, such as summer home.

100% Of Rebuilding Costs
Most insurance companies recommend you purchase coverage equal to one hundred percent of the cost of rebuilding your home from the ground up. This way you are protected against the total as well as the partial destruction of your home. The rebuilding costs can go up or down depending on market conditions, so find out about additional coverage if you feel that what you have is not enough.

Replacement Cost
The home's replacement cost is another way of saying rebuilding cost, but with a twist. Rebuilding costs are allowed to fluctuate according to market conditions. The home's replacement cost is the cost of replacing the home in its entirety according to market prices when you purchased the policy. This is very risky for the insurance company, especially if your coverage conflicts with other policy elements. Expect negotiating on this point to be a little more difficult.

Guaranteed Replacement Cost Insurance
This is even more risky for insurers. This type of insurance is like replacement cost, but this insurance does not have a dollar limit or a deduction for depreciation. This policy ignores these two qualities, which the actual cash value policy takes into account when calculating payout costs.

Flood Insurance
Flood insurance is necessary only in areas considered to be moderate or high-risk flood zones. If you live in an area known for thunderstorms, you may want to consider purchasing low-level flood insurance as sometimes floods do happen.

Contents Insurance
This type of insurance covers personal possessions from loss and damage as long as they are in the policyholder's residence. This insurance has no limits on the cost of replacing personal items, so the full amount can be paid out of the policy.

Special Limits
Even with contents insurance, special limits apply to certain categories of items: jewelry, firearms and cash being the primary culprits.

Conclusion
Home insurance is an essential part of protecting yourself from loss and damage. Read all policies carefully before signing.

About the Author
As a direct insurance agent for the past 15 years, G. Henry Serrano shares his experience and expertise to assist homeowners in finding home insurance calculator and coverages. From locating the best insurance coverages to understanding home insurance companies, G. Henry Serrano writes on the most common insurance issues facing homeowners.

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