Have Enough Insurance if Your Home Burned Down?
If you own a house, you probably have homeowners insurance. A standard policy will pay the costs for you to repair or rebuild your home, if it is damaged or destroyed by fire, hurricane, hail, lightning or other disasters, excluding floods and earthquakes. But are you sure you have enough coverage, if your home burns down to the ground? You may be surprised to learn most homeowners are under insured. Review your insurance every three to five years to ensure you have enough coverage. And make sure you ask for enough protection, when you apply for home insurance quotes.
In a recent incident, a Tennessee family learned that its insurance coverage wasn’t enough to rebuild, after firefighters refused to put out a fire. The family hadn’t paid the required annual fee for fire protection. While the family’s insurance policy will reportedly pay off the mortgage and cover some other costs, it isn’t adequate to rebuild their home or replace their belongings. (The insurance company could have reduced payouts, since the family had failed to subscribe to fire protection services. However, the insurer has not enforced that policy provision in similar situations.) Before you obtain home insurance quotes, determine how much coverage you would need, if a fire or other disaster destroys your home.
Replacement value
Most homeowners policies cover the replacement cost for damage to structures — the house, garage and other buildings on the property — with materials of similar kind and quality. Even if land prices have plummeted in your area, building costs may have remained the same — or even increased. To get an estimate of how much it will cost to rebuild your home, consult your local builders association or a reputable builder. You can also buy optional coverage, which will provide an additional 20 percent or more over the limits in your policy. This gives you extra protection after a major disaster, when construction costs typically increase. Figure out your family’s needs, before you apply for home insurance quotes.
Actual cash value
Most home insurance policies provide coverage for the contents in your home equal to 50 to 70 percent of the amount of insurance you have on the structure of your home, according to the Insurance Information Institute. So if you have $100,000 worth of insurance, you would have between $50,000 to $70,000 worth of coverage for your belongings. Actual cash value is the amount to repair or replace your belongings, less depreciation. For example, if your five-year-old television is destroyed in a fire, you will not receive the amount you paid, but a percentage of the original value based on the age of the TV set as well as wear and tear. Some standard home insurance policies automatically cover your personal possessions on an actual cash value basis, according to III. After you obtain home insurance quotes, review the policies carefully.
Replacement cost
This covers the amount it would take to replace your belongings with items similar type and quality, without deducting for depreciation. So, you will receive the full value of your five-year-old TV set, minus your deductible and up to the limits of your policy. To make sure you have enough coverage, conduct an inventory of all the items in your home that you own and their replacement cost before you apply for home insurance quotes.
Remember when you buy a homeowners or a renters policy, you’re insuring the structure of your home and your personal belongings in your home. Once you have determined the best coverage for your family’s needs, you’re ready to obtain home insurance quotes. Call agents in your local area, contact several insurance companies directly or use InsuranceQuotes.com to instantly get competitive insurance quotes from the nation’s leading insurance providers. Take the time to protect you and your family today.
