Home Insurance

Your home is most likely the biggest financial investment that you’ll ever make.  As such, you’ll need an insurance policy which will fully protect that investment.  But all homeowner insurance policies aren’t created equally.  Some things to consider when shopping for home insurance include the following:

• Most lenders will require that you show some type of proof of insurance.  But the type of insurance you purchase is up to you.  There are typically three different levels of home insurance:
• Actual Cash Value (ACV) coverage offers the least amount of protection and, as you might expect, often has the most affordable premiums.  ACV policies cover the cost of your house and the cost of your belongings in the house after deducting depreciation.  The depreciation clause is important as it only provides the value of the structures and items at the time of the loss rather than at the time of the purchase.  So, depending on the amount of depreciation assessed, it might be difficult to get back to a pre-loss condition without some out-of-pocket expenses.
• Replacement Cost coverage is one step above an ACV policy in that it doesn’t assess depreciation on your home or belongings.  So with a Replacement Cost policy, you’ll be able to repair or rebuild your home up to the original value.
• Guaranteed Replacement Cost is the most comprehensive coverage and the policy which will also be the most expensive.  This coverage guarantees the replacement of the home even if doing so exceeds the limits on the policy.  So you’ll be guaranteed not to be underinsured in the event of a total loss.
• A standard homeowner insurance policy will cover the dwelling, the personal property within the dwelling, and personal liability in the event that someone has an accident or is injured while at your home.  But there are additional coverages called riders or endorsements that should also be considered.  These endorsements to your standard home insurance policy extend the coverage for certain types of property or peril.  A jewelry rider is a common example.  Oftentimes the base policy will set a limit on the amount of personal property that will be reimbursed from a loss.  A rider can be purchased if the value of your jewelry exceeds the personal property limits of the base policy.  Another common rider is for water backup coverage as this peril is often excluded in a standard home insurance policy.