Home Insurance: The Basics
A home is probably the most valuable asset you will ever own, so it must be protected with adequate insurance. The basic homeowner insurance policy covers against damage from thunderstorms, lightning, fire, smoke, burglary, defacement of property, civilian chaos, vehicle or aircraft damage, and volcanic eruptions. More comprehensive policies cover against damage by earthquakes, floods, ice, sleet or the malfunction of an air conditioner or heating unit.
Condominium owners are typically required only to have an insurance policy that reimburses them for loss of their belongings as well as floors, walls, cabinets and fixtures. Structural insurance which covers the roof, outside and adjoining walls should be provided by the condo association.
There are two primary types of home insurance:
- Actual cash value coverage pays the value of property or belongings at the time they were lost, taking into account their age and depreciation.
- Replacement cost coverage provides enough money to replace lost or damaged property or belongings with new items at cost.
Usually there are replacement-cost limits for certain expensive items, such as jewelry, artwork, antiques and home office equipment. Consult your insurance agent about taking out individual riders for additional coverage on these possessions.
It’s wise to keep an itemized record of household contents, noting their value, date of purchase and description. Valuables should also be photographed or video taped. This will help determine their replacement cost.
Experts suggest that a home be insured for at least 80% of what it would cost to replace at its current value. Finally, a homeowner policy should be reviewed every year. If you have made any improvements, or the home value has increased, more insurance may be required.
Always consult with a licensed insurance provider before making any changes to your home insurance policy.