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Understanding Those Terms On Your Home Insurance Policy
By Joseph
Buying a home means that you will be required by a lender to have home insurance. It provides protection for you in the event that anything should happen to your home. The protection can cover many things - or a few - depending on what kind of coverage you have. If you are either about to buy a home policy, or have forgot what your policy covers, here is some help for you to understand some of those terms.
Before you start, though, you should have a real good idea of what your house and outbuildings are worth. This will enable you to look at the various terms and understand which form of insurance, and how much you need from the start.
Actual Value Versus Replacement Value
These are the two ways that you can be covered in a home policy. Actual value means that you assign a fixed value to your home, and you will be covered only up to that amount. However, know that this also includes depreciation, meaning that the older your house and possessions are, the less you will receive. Certainly this is the less expensive way to go, and many states no longer offer it, but you could end up getting less than 50% of what you paid for your house. Unless you have a large bank account somewhere, you could not rebuild your house on this amount today.
Replacement value, on the other hand, is the better deal. It offers to replace your house or contents - no matter what the cost. Depreciation really does not even enter the picture. Neither is there a ceiling on the limits, either. In other words, if your house is worth $100,000 and becomes destroyed, you will get an equivalent house built for you - even if it costs $120,000 to do it.
Event
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Coverage or All Events
Home can be purchased covering what is called events, or all events. Event coverage means that it will cover you when certain events occur - but only those events. Generally, you can get this type in different levels, covering more or less events of possible loss. All event coverage, however, will cover everything with the usual exception being that of flood, earthquake or hurricane. This coverage usually must be purchased separately - if you want it.
Content Coverage
All of the contents of your house can be covered, up to a certain percentage of the value of the house. Generally, it is a high enough percentage that most of your contents are covered. In order to receive a recompense of your contents, however, it is best to have a careful inventory. This is generally best accomplished by taking a video camera through each room of the house and recording your various comments about the items - one at a time for the more valuable contents. You will even want to go through your closets and basement in order to show everything. This is especially true of jewelry, art, and other valuable items you possess. This type of item may also require special insurance.
Check Policy Regularly And Update
Getting your new policy means you should compare prices from various companies so that you get a good deal. Home insurance policies, though, should not be allowed to sit on a shelf and collect dust. Because of inflation, and the changing of house values, you will need to update the amount of you have, probably every other year or so. If your house cost $75,000 15 years ago when you bought it, it could easily be worth more than $100,000 now. But if you are only covered for $75,000 - could you rebuild?
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