Understanding Your Homeowners Insurance Coverage Options

Replacement cost coverage – Pays the cost of repairing or rebuilding your home or replacing your possessions without a deduction for depreciation.

Guaranteed/extended replacement cost coverage – This is the highest level of protection. Guaranteed replacement pays the cost to rebuild your home as it was before the disaster – even if that cost exceeds the policy limit. This policy will protect you against increases in homebuilding costs or other unexpected situations. In most cases this coverage will not compensate for home upgrades to comply with building codes. If your home is older, this policy may not be available to you. Extended policies pay a percentage over the policy limit to rebuild your home. Usually an extended policy will pay 20 to 25 percent more than the limit of the policy. Be sure to see what coverages your state offers. Not all states offer the same coverages.

Actual cash value – This coverage pays to replace your home/possessions minus a deduction for depreciation.

Other homeowner’s coverage:

Structures other than the dwelling – Includes structures on the residential premises that are not attached to the dwelling – sidewalks, driveways, permanently installed yard fixtures and private or decorative fences. The average limits on coverage are 10 percent of the value of the dwelling.

Loss of use – Reimburses for expenses beyond replacing property if a home cannot be lived in because of fire. This coverage usually pays for the living expenses incurred maintaining a normal lifestyle.

Mobile homes – Offered by a few companies. This coverage is considered residential if the mobile home is established as a permanent residence.

Building code upgrade – reimburses for building code upgrades that may be required during the repair/rebuilding process.

To learn more about what should be in your homeowner’s insurance policy, be sure to consult your local insurance agent. Never take a gamble with your homeowner’s insurance – be sure it’s up-to-date and make sure you are covered for potential disasters.

*Please note that this article is not a professional consultation. This article is for general information only. Always seek specific information from a licensed insurance professional.*

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