How To Do A Better Job Of Picking Home Insurance
Checking out home insurance plans can leave you wondering which ones might suit your situation. Let's look at some of the basics of hunting for home insurance.
Actual Cash Value vs. Replacement Cost
These are the two most common forms of home insurance plans. Replacement cost is a model where your insurance carrier is on the hook for the full amount of money that's necessary to replace a house that has been damaged or destroyed. This extends to many types of contents. Actual cash value is sometimes called market value, and it leaves the insurance company paying the replacement cost value minus depreciation.
Notably, a different form of value book value is not a concern in either of these situations, so it's a bit different than you might see with car insurance. There is also a subset called rare replacement cost that's intended to address the difficulty inherent in replacing antiques and historic homes.
What is Covered?
It's important when examining home insurance plans to be clear about what is covered. For example, insurers may be more reluctant to cover mold damage in American states east of the Mississippi River because humidity levels are higher there. Similarly, home insurance plans taken out by landlords do not cover any possessions of tenants, who'll need to acquire separate renters' insurance.
Construction and renovation efforts are never covered by home insurance and that should be factored in before starting any DIY project. When hiring contractors to handle any work, even if it's as simple as having an electrician put in a new ceiling fan, it's wise to only work with businesses that are insured.
Highly unpredictable and unlikely events tend to be covered in most basic home insurance plans. These plans are usually referred to in the industry as HO-1 coverage. They cover things like lightning strikes, fires, vandalism, and damage caused by civil unrest. They also extend liability coverage for personal injuries that might occur involving third parties on your property, such as a slip-and-fall incident on a properly maintained sidewalk.
Intriguingly, most home insurance plans also extend coverage to detached structures on the same property. For example, your garage will likely be covered.
Many types of coverage are predicated on regular maintenance. It's common for insurers to refuse to cover a house if its roof is older than 20 years. When a plan is up for renewal, a carrier may also conduct an inspection to verify insurability. Talk with a provider about home insurance plans to find the right option for you and your home.