There are different types of policies available for homeowners depending on what you want to have coverage for and whether you own your own home or rent from someone else. There are two sections to a homeowner policy – one that covers the actual structure of the home and any outbuildings and another that covers the cost of your personal belongings and furniture as well as liability should someone become injured on your property.
You have to decide the amount of coverage you want to have based on the price of your home and the total costs of your personal effects. There is a difference between the actual cash value of your coverage and the replacement cost. When you choose actual cash value, you will not get the amount that the item cost you or the amount you will need to buy another item, whether it is a home or an appliance. The age of the item is taken into consideration and you receive a depreciated value based on the current market conditions. It means that you would get an amount equal to what something of its age would sell for now. If you choose to have replacement cost, then you will receive an amount that is necessary to purchase the item at today’s prices. This is the format that most people choose to have when they are purchasing a homeowner’s policy.
If you do not own your own home, but are renting, then you can have insurance on the contents only, provided the person who owns the property has insurance. This insurance covers what you own in the home and has nothing to do with covering the structure of the home. You will need to take an inventory of everything you have in order to make sure that you are fully covered. You can also choose to have replacement cost or actual value insurance.
There is a different type of insurance policy for those who purchase co-op or condominiums. You pay condominium fees each month that contribute to the building insurance in general. You have to still have your own policy in place to cover your own furniture and any additions you make to the unit itself. The building insurance generally covers the walls and the roof, but you should carefully read the policy to see what you are responsible for. A typical insurance policy for a co-op or condominium should include:
If you live in an area known to have earthquakes, you can also have this included in your policy.
In addition to a regular home insurance policy, you can choose to purchase an umbrella liability to encompass the whole policy and fill in any gaps that your homeowner’s policy does not fill. Umbrella insurance sits on top of your regular insurance policy similar to an umbrella giving you extra protection in addition to what you already have. If a person sues you for some accident on your property and the settlement is $300,000 and you only have $100,000, under a regular policy you are responsible for paying the difference. If you have an umbrella liability policy, the insurance will take care of the whole settlement. Having a policy that protects you against high claims is not costly. It would probably cost about an extra $200 or $300 per year on your insurance premium.
When you decide to purchase your homeowner’s policy, you should ask the agent to explain all the different policies to you so that you can make an informed decision.
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