To protect the value of a home, it is not enough to have a broad coverage policy. The homeowner must be aware of exactly what the policy covers. How is the home value protected? This is an important question to keep this in mind when requesting home insurance quotes. There are areas that general homeowners insurance policies may fall short of providing adequate coverage.
Policy limits on replacement coverage is one way that homeowners sometimes find they were underinsured when a disaster causes them to have to rebuild their home. When coverage is based on actual value, there may be a shortfall when it comes to rebuilding. Actual cash value takes the value of the home and subtracts depreciation from the value. The homeowner must come out of pocket for the deficit. A better type of coverage is guaranteed replacement cost. This guarantees that the home will be rebuilt with the same type and quality materials as the original construction and does not subtract depreciation.
When shopping around for home insurance quotes, it is essential to know the replacement cost. Some people confuse the purchase price with the replacement cost. That may be wrong for a couple of reasons. First, the sale price includes the land the house is sitting on. The replacement cost of the home involves the cost of the dwelling only. Second, it may cost more to replace the home at today's prices for materials and labor than the purchase price. Know the square footage of the home and ask builders for the current square foot price to calculate replacement cost.
If an older home is destroyed by a covered cause, the building codes have probably changed since the original construction. This usually equates to a stricter standard that must be met. That usually involves extra expense. There is coverage for these ordinance changes that will pay a certain amount toward rebuilding to the stricter code.
Standard homeowners insurance does not cover flood damage. If the home is in a flood or mudslide prone area, a separate policy to cover damage resulting from those occurrences should be obtained. The federal government issues flood insurance that also covers mudslides. It is an inexpensive way to protect a home from these catastrophes.
Updating the insurance company whenever improvements are made is the best way to safeguard home value. A well-informed homeowner also assesses the replacement value of the home each year to determine whether the replacement value should be increased on the policy. The worst scenario is that the homeowner finds he or she was underinsured after a disaster. Have the facts of exactly what kind of coverage offers the best protection before calling for home insurance quotes.