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ARE YOU REALLY COVERED BY YOUR HOMEOWNER'S INSURANCE?
You anticipate that your homeowners insurance policy
will assist you in your recovery from a disaster by
granting you with enough money to restore anything
destroyed or damaged in such an occurrence.
Carefully examine your policy. It is very possible that
you are not protected that way you think you are.
It is common for most homeowners policies to only fully
cover the actual structure of the house. The contents
are not covered for replacement-cost value. Unless your
policy states otherwise, the content's of your home are
typically only covered for their 'actual cash value'.
So what does this mean?
Replacement cost or actual cash value?
When a claim is filed, your carrier computes how
much to pay by assessing what it will cost to replace
your property with new property of the same type and
quality. But there is a important difference: If your
policy covers your home's contents (your personal
property) for the actual cash value, the insurance
company will deduct depreciation from your personal
property's total value prior to reaching a figure.
Your payment will most likely be less than what it would
actually cost to replace or repair. However, if you have
replacement-cost coverage, your carrier will pay what
the costs to replace or repaid your damaged property at
today's prices without deducting for depreciation.
The language of actual-cash-value is standard, however
the majority of insurance companies offer
replacement-cost coverage as an option. Cost will vary
from company to company. Depending on the type of
property, replacement cost will run you about 10% more
per year than actual-cash-value coverage.
Utilizing an actual-cash-value policy will save you money
on your premium. However, nowadays, most agents
recommend replacement-cost coverage.
You need to evaluate the added cost of replacement
coverage contrary to the possibility for additional cash
expenses in the event of a disaster. Not having
replacement cost coverage will result in you having to
pay the difference in the amount your carrier will pay
and what the actual cost to replace is.
Replacement-cost coverage varies
All carriers offer different levels of
replacement-cost coverage. Get in touch with you agent
and find out what is covered in your area and what the
limits are. It is very typical for carriers to add
maximums to their replacement-cost coverage policies, to
protect themselves from overexposure in the event of a
loss.
For example, many people look to replace their roofs
after the winter season. In the event of a loss as a
result of a snow storm, some insurers will limit the
replacement value on roofs. They want to regulate their
liability on old, ready-to-be-replaced roofs, by
limiting the amounts payable, particularly when it is
over a certain age.
Inventory your valuables
Creating an inventory of your possession will help you
calculate their value. Store your inventory in a
protected area outside of your home, like a bank
safe-deposit box. Valuable good like jewelry or artwork
will likely require additional insurance to cover them.
You should also store photographs along with written
appraisals with your inventories. This information will
be required by your insurance company when you file a
claim. This will allow you to easily identify missing
items in the event that your home is destroyed or broken
into.
Videotape is an excellent method for documenting your
larger possessions, a written inventory is very
important for recording the smaller items. It's wise to
inventory all of your stuff with detailed descriptions
including cost, make, model, and date of purchase.
Maintain photocopies of all of your receipts and other
applicable information.
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