Insurance Due to the increased awareness of the need to get affordable home insurance coverages, more and more people are doing this. Getting your home covered is just the first of many steps. Do you know all there is to know about the policy you bought? The policy terms and conditions? The difference between replacement cost and actual cash value? These questions and others like it should be asked and answered so you can know the full extent of your coverage so as to ascertain on time if you are adequately covered. Understanding some terms in our policy has become very important since many insurance companies hide behind these terms to surprise customers. A lot of people have been surprised by the meaning of some terms when they tried to make a claim. Avoid this. Make sure you ask about any term you do not understand. We would look at two such terms – 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. How possible this would be is very much dependent on the value of your home and the terms of your policy. You can be sure of this only if your policy clearly offer your Guaranteed Replacement Cost. This is a magic phrase that if you do not have in your policy, you should begin to ask questions. Your policy could limit your claims to 20% increase over the insured’s dwelling amount. 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 guess this is simple enough. 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. Payments of 20% over the insured’s dwelling amount simply means that what you would be paid upon making a claim is 20% more than what you bought the property which I hope you know is not the rebuild cost. The implication of this is this. if when you bought your home it cost $150,000 and then when you make a claim it would cost $200,000 to rebuild, your insurer would only pay you (30,000) over the cost of the home so you would get $180,000. So you would have to come up with the balance of $20,000. How can I correctly get the replacement cost of my home? You can talk to your agent for this. You can also just simply find out from builders or any one with enough building knowledge how much it would cost to rebuild your home. Your rebuild cost does not include the cost of the land on which the building stands. Actual Cash Value. Actual cash value is simply the replacement cost less depreciation value. We would continue with the same example as above where your home cost $150,000 at the time of purchase and now 5 years down the line when it would cost $200,000 to rebuild, you make a claim. Your insurer would find out the depreciation value. 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. You would be paid $200,000 – $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. You can avoid all this if you get a policy that offers Guaranteed Replacement Cost. It is very necessary to put in more effort into getting affordable home insurance especially if we consider the number of insurers and policies available today. You can do this with quotes comparison. Start your comparison now with free home insurance quotes. Free home insurance quotes can be gotten from quotes comparison sites and would give you a peek into what different insurers are offering and their rates. About the Author: 相关的主题文章: