Due to the increased awareness of the need to get affordable home insurance coverages, more and more people are doing this. It is however not enough to just have your home covered. Do you know all there is to know about the policy you bought? The policy terms and conditions? Do you have a replacement cost or actual cash value policy? These and others are questions we should not just ask but have answers to otherwise we would only realize too late that though we had a home insurance policy, it was not as complete as we thought.
Many insurance companies deceive their customers with terms the customers do not fully understand so be sure you get satisfactory explanation to every term in your policy you do not understand. For many, these terms only become clear when they want to make a claim. This is wrong. Be sure you understand fully every term you see. let us look at replacement cost and actual cash value.
What we all want is to have a cover that can help us replace our homes if we should lose it to one or more perils. Having your home replaced has a lot to do with the value of your home and what the insurer says in the policy. You can be sure of this only if your policy clearly offer your Guaranteed Replacement Cost. This term is very important if you would get enough to rebuild your home or replace your belongings. In your policy, you could be eligible for a settlement %20 more that the original cost of the home. Let me try to break these down.
If your policy offers you Guaranteed Replacement Cost, then your claims settlement would be the amount needed to rebuild your home. I hope this is clearer. With Guaranteed Replacement Cost, if when you bought your home it cost $150,000 and then when you are making a claim maybe some years later it then costs $200,000, you would be paid $200,000.
In the case of 20% over the insured's dwelling amount, you would paid 20% more than the original cost of the home. This means that if your home cost you $150,000 when you bought it, if you make a claim, you would be paid $180,000 regardless of if what you need to rebuild is $200,000. You would therefore have to source the remaining $20,000.
Is there a way to know my home's replacement cost?
An insurance agent can help out with this. Another option would be to get a builder to give you an idea of what it would cost to rebuild your home. Your rebuild cost does not include the cost of the land on which the building stands.
Let us try to explain the other term "Actual Cash Value".
When we talk about actual cash value, we are talking about the replacement cost minus depreciation value. Using the same example we used above, if your home cost $150,000 when you bought it 5 years ago and now that you are making a claim it would cost $200,000 to rebuild, your insurer would calculate the value of depreciation. The calculation is something like this. We assume the depreciation value is 5%. Multiply 5% by 5yrs by $200,000 divided by 100% = $50,000. What you would therefore get is $150,000 that is replacement cost ($200,000) minus depreciation value ($50,000).
Your insurance company considers both the replacement cost and the depreciation value. What this means is that as the property ages, your possible settlement reduces. Getting a policy which provides Guaranteed Replacement Cost takes care of all these conditions.
There are so many insurance companies out there and you need to be careful to shop for the one that would offer you the best coverage and at the most affordable price. Doing quotes comparison can help you out. Start your comparison now with free home insurance quotes. With free home insurance quotes which you would get freely from quotes comparison sites you can get to know what a lot of insurance companies are charging for different policies.
Many insurance companies deceive their customers with terms the customers do not fully understand so be sure you get satisfactory explanation to every term in your policy you do not understand. For many, these terms only become clear when they want to make a claim. This is wrong. Be sure you understand fully every term you see. let us look at replacement cost and actual cash value.
What we all want is to have a cover that can help us replace our homes if we should lose it to one or more perils. Having your home replaced has a lot to do with the value of your home and what the insurer says in the policy. You can be sure of this only if your policy clearly offer your Guaranteed Replacement Cost. This term is very important if you would get enough to rebuild your home or replace your belongings. In your policy, you could be eligible for a settlement %20 more that the original cost of the home. Let me try to break these down.
If your policy offers you Guaranteed Replacement Cost, then your claims settlement would be the amount needed to rebuild your home. I hope this is clearer. With Guaranteed Replacement Cost, if when you bought your home it cost $150,000 and then when you are making a claim maybe some years later it then costs $200,000, you would be paid $200,000.
In the case of 20% over the insured's dwelling amount, you would paid 20% more than the original cost of the home. This means that if your home cost you $150,000 when you bought it, if you make a claim, you would be paid $180,000 regardless of if what you need to rebuild is $200,000. You would therefore have to source the remaining $20,000.
Is there a way to know my home's replacement cost?
An insurance agent can help out with this. Another option would be to get a builder to give you an idea of what it would cost to rebuild your home. Your rebuild cost does not include the cost of the land on which the building stands.
Let us try to explain the other term "Actual Cash Value".
When we talk about actual cash value, we are talking about the replacement cost minus depreciation value. Using the same example we used above, if your home cost $150,000 when you bought it 5 years ago and now that you are making a claim it would cost $200,000 to rebuild, your insurer would calculate the value of depreciation. The calculation is something like this. We assume the depreciation value is 5%. Multiply 5% by 5yrs by $200,000 divided by 100% = $50,000. What you would therefore get is $150,000 that is replacement cost ($200,000) minus depreciation value ($50,000).
Your insurance company considers both the replacement cost and the depreciation value. What this means is that as the property ages, your possible settlement reduces. Getting a policy which provides Guaranteed Replacement Cost takes care of all these conditions.
There are so many insurance companies out there and you need to be careful to shop for the one that would offer you the best coverage and at the most affordable price. Doing quotes comparison can help you out. Start your comparison now with free home insurance quotes. With free home insurance quotes which you would get freely from quotes comparison sites you can get to know what a lot of insurance companies are charging for different policies.
About the Author:
How Do I Start Getting Quotes? Start from these links Affordable Home Insurance Quotes and Free Home Insurance Quotes Chimerenka Odimba is the publisher of several finance based sites.
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