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Q.What should I look for in a homeowners insurance policy?

A.Not all homeowner's insurance policies are the same. Before purchasing homeowner’s insurance it is important to know not only the price, but also what is and is not covered.

Replacement Value versus Actual Cash Value

Some policies cover losses by paying the “actual cash value” of the loss, while other provide “replacement cost” coverage. The difference between the two can be significant. If a policy provides coverage at “actual cash value” then covered property damage will result in you being compensated only the depreciated market value of the damaged property. If the policy provides “replacement value” coverage, the owner would be compensated by being paid the cost to replace the damaged property. Generally “replacement value” coverage is preferable.

Watch for Exclusions

All homeowner policies contain a list of exclusions. Typical exclusions include damage due to flooding, earthquake, normal wear and tear, war, and intentional acts. Flood and earthquake coverage generally must be purchased separately.

Before you purchase make sure you list all of your home insurance needs and call different providers. Note what is and is not covered by each provider and the policy limits for each type of coverage provided. Then discuss these matters with your insurance agent, or make a reasoned decision.

© Copyright 1999-2018 Melissa C. Marsh. All Rights Reserved. All Information on this website is subject to a Disclaimer and Use Agreement. This information is provided as general information only and should not be construed as legal advice. We advise you to seek the advice of competent legal counsel to address your own specific questions, facts and circumstances.