There is a lot to be learned when it comes to home insurance. Knowing the basics is essential if you have a few items on your property or are planning to move.
Actual Cash Value vs. Replacement Cost
Homeowners often need clarification about the difference between actual cash value and replacement cost in home insurance. Most homeowners assume that the term means the same thing, but several significant differences exist. Before purchasing home insurance Poulsbo WA, it is essential to learn what each means.
First, replacement cost is insurance that pays for a damaged item to be replaced. The value is calculated based on the current cost of similar items. Replacement cost insurance typically has higher premiums.
Whether you have lost a piece of furniture, a TV, or a computer, you can usually claim your loss from your insurer. Unlike replacement cost, however, actual cash value coverage considers depreciation. Depreciation occurs over time and is the amount of money lost due to the wear and tear of the item.
Unlike replacement cost, actual cash value policies don’t pay for replacing a damaged item. Instead, they cover it at its current market value. The insurer may reimburse you if the thing is more expensive than the policy’s deductible.
Loss of Use Coverage
Loss of use coverage in home insurance provides financial relief to homeowners. It covers additional living expenses when a homeowner cannot live due to a covered loss. The policy will reimburse for a temporary rental, hotel, restaurant, pet boarding, or other related expenses.
If a natural disaster damages a house, such as a fire, a tornado, or an earthquake, the homeowner may not be able to return to their home. Home repairs may take weeks or months to complete. A house that has been damaged by flooding is a different story. Depending on the type of damage, homeowners will need to purchase a special insurance.
Loss of use coverage is typically based on a percentage of the dwelling’s total value. For instance, a home with an insured value of $300,000 would have a loss of use limit of $60,000. This amount may vary from one insurance company to another.
In addition to paying for temporary housing and a new place to live, loss of use coverage will also pay for moving to a new location. Some insurers may offer an advance on additional living expenses.
Purchasing excess liability insurance is a good idea if you have a high-risk home. Not all insurers offer this type of coverage.
Excess liability coverage is meant to provide additional protection to your assets in case you or a family member are sued. It works by covering claims not covered under your underlying liability policy.
A personal umbrella policy is similar to an excess liability insurance policy. This policy extends coverage from your primary homeowner’s policy to your family members.
An umbrella policy can protect you from lawsuits but offers other benefits. These include coverage for your automobile and personal property and the option to cover your domestic staff.
Liability insurance is essential to many people. Not only does it help you in the event of a claim, but it also protects you from being sued or having your assets stolen.
There are several liability policies, but a homeowners insurance plan is the most common. Many homeowners opt for a minimum of $100,000 in coverage. Alternatively, they may purchase an additional $300,000 or more in coverage.
Bundling Home and Auto Insurance
Getting a bundled auto and home insurance policy can save you money. The savings can be significant. However, it’s essential to know the pros and cons of getting a home and auto bundle before you choose to get a policy. You don’t want to settle for less than the best coverage.
One of the most significant advantages of bundling is the multi-policy discount. Many companies offer a discount on your premiums for bundling multiple policies. This is especially useful for homeowners needing auto and home insurance.
Bundling can also be an excellent way to avoid having to file an annual review of your insurance. But be sure to keep up with your premiums. Consider switching carriers if you’re unsatisfied with the rate you’re paying. Depending on where you live, some companies charge more for their policies than others.
If you decide to switch carriers, check out the terms of your current policy to ensure you don’t have to pay cancellation or termination fees. Some companies offer a refund on the portion of your premiums you’ve paid in advance.