Usual insurance needs:
Replacement
Cost vs. Actual Cash Value
What type of policy should you ask for? That depends
upon your personal situation. Generally, you should insure your
home for 100% of its value (including its contents) with a replacement
cost policy. Then, if your house costs $100,000 to rebuild from
the ground up, that's what insurance would pay in the event
of a total loss. Likewise, if shingles are blown off the roof
or cabinets are damaged by fire, no depreciation would be deducted
even if the damaged property is used and worn. If you
are insured for actual cash value, you will pay less for your
policy, but you may not receive enough money to replace your
damaged property. Instead, you will receive the amount your
property is worth at the time of the loss - its cost minus depreciation
for age and normal wear and tear.
Some forms of property, such
as fences, awnings and swimming pools, are usually settled at
cash value. So is personal property such as appliances, furniture
and clothing, unless you specifically purchase replacement cost
insurance.
Ask
yourself the following questions to decide how much insurance
you may need:
- How much will it cost to replace my home today?
Ask an appraiser, builder or your insurance agent for an estimate.
If you make drastic improvements to your home, such as remodeling
or building a deck, you should update your appraisal and coverage
to compensate for the increased value.
- Am I protected for inflation? Many companies
automatically adjust your premiums upward to cover the rising
cost of replacement. Otherwise, you should review your policy
once a year to see if you still have adequate coverage.
- Am I planning any additions or renovations?
Adding a family room or renovating a basement will increase
the value of your home and the amount of coverage needed.
Is
the value of my personal property fully covered?
If you have many valuable possessions or have recently
acquired new belongings such as stereos, televisions, computers,
cameras and musical instruments, you may need to pay for
increased coverage. Ask your insurance agent if you are
covered for specific items of value. If not, consider purchasing
extended coverage to protect jewelry, furs, silver and the
like.
- Do I need any optional coverage? Some losses are
specifically excluded in all policies, such as those resulting
from floods and earthquakes. If these are a danger in your area,
you may want to obtain additional or separate coverage.
- Do I have an inventory of my personal belongings?
Complete the room-by-room inventory at the end of this booklet,
listing the approximate value of your possessions. Keep the completed
list in a safe place outside your home, such as in a safe-deposit
box or at your office. Photograph or videotape each room, if possible,
and keep this visual record with your inventory.
What If
I Live in an Apartment or Condominium?
If you own a condominium, the condominium association may
pay for the insurance protection on your building, as well as liability
protection if anyone is injured in common areas. You may need to
buy your own liability insurance. Read your association's policy
carefully to determine if you are adequately covered, then purchase
additional protection if necessary. If you rent an apartment or
house, the owner's property and liability are covered by his or
her insurance, but your property and liability are not. You may
be held liable, as well, for damages to the owner's property done
by you. You can purchase insurance for your personal possessions
as well as liability protection under a renter's policy.
What If
I Rent Property to Others?
You should have a separate policy for dwellings you rent
to others. Insurance will protect the property itself as well
as any of your personal belongings at that residence. You also need
business liability and medical coverage for anyone who might get
hurt on your property as a result of your property or action. Ask
your insurance agent for details on these coverages.
More than ever, quality homeowners insurance
is an absolute necessity. Without it, an accident or natural
disaster could mean financial ruin to you or your family.
Get a free quote today!
More than ever, quality homeowners insurance
is an absolute necessity. Without it, an accident or natural
disaster could mean financial ruin to you or your family.
Get a free quote today!
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