Homeowner’s insurance or also known as home insurance is an essential element of owning a home. Homeowner’s insurance is required by all lenders and or mortgage companies. However, even though you are required to have a homeowner’s insurance policy to get a loan, that doesn’t mean you have to settle on the first policy offer that you get. There is a lot of a homeowner’s insurance policies out there and you can control and get the coverage you want. Signet Insurance Group would like to break down the basics of homeowner’s insurance for those who are buying a home for the first time to better help you get the policy you want.
Basics of Homeowner’s Insurance
There are key elements to every homeowner’s insurance policy that needs to be understood. First, a homeowner’s insurance policy generally covers destruction and damages to the inside and outside of the home. They also cover loss or theft of possessions and cover person liability for harm to others. Next there are three basic levels of coverage. The levels of coverage are actually cash value, replacement of cost, and extended replacement of both cost and value. The policy rates are determined by the insurer’s risk that you will file as a claim. Often they will assess the risk based on past claim history as well as the history of the local neighborhood. Lastly, when shopping for a policy, you will want to seek a quote and coverage from at least five different companies. This will better help you pick the right policy coverage.
Different Level of Homeowner’s Insurance Coverage
When first shopping around for a homeowner’s insurance policy you will want to have a good understanding of the different levels of coverage. In the U.S. there many different forms of homeowner’s insurance that is becoming standardized and is designated as HO-1 through HO-8. Each offer varies in the levels of protection. The homeowner will need to determine the level of protect they feel they will need and want. Following are the different levels of coverage and want they encompass.
Actual Cash Value: Actual cash value covers the cost of the home along with the value of all of your belongings after deduction or depreciation. (Depreciation – how much the items are currently worth, not how much the cost was at the time of purchase.)
Replacement Cost: Replacement value policy covers the “actual cash value” of the home and your belongs, but without the deduction or depreciation. So they will cover the cost of the items in the home at the same price at the time you purchased them. Replacement Cost will ensure the home is rebuilt to the original value of the home.
Guaranteed or Extended Replacement Cost/Value: Extended replacement cost and value is an inflation-buffer policy, the cost of repairing or rebuilding your home is covered even if it extends past your policy limit. The extended coverage limit may vary from 20% to 25% past your policy limit, which means they will cover more than what your policy covers.
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There is a lot to know about homeowner’s insurance policies. If you need help finding and understanding a sound homeowner’s insurance policy, contact Signet Insurance Group today.
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