UNDERSTANDING Your Home Owners Insurance Policy
If you own a home, every year you face the daunting. Let’s have a look at what you need to know when buying your home owners insurance.
Did you know that you need to have insurance for a minimum of 80% of your value excluding your land? That means the value of your home, everything in it, any additional buildings like a garage, and everything in them. Do you have adequate insurance? Make sure you are proactive and have the correct insurance, before something ‘bad’ happens and you find out you are not properly covered. In fact, you should review your policy annually to make sure you still have adequate coverage. We tend to buy these things and then forget about them.
When you are reviewing your policy, there are a few things you should know about your home insurance policy.
DECLARATION PAGE – This is an annual statement that you make to your insurance company outlining your cover and your premium. Make sure that you keep it safe with your policy.
ACTUAL CASH VALUE COVERAGE – There always seems to be some confusion here. If you purchase a home owner’s policy that pays actual cash value on your content, should something happen, you will receive a payment for what the item was worth at the time of the loss, not what it costs to replace it.
FULL REPLACEMENT COST COVERAGE – This is best type of insurance to carry. With full replacement insurance, if your property is destroyed, the insurance company must pay the full replacement cost or rebuild your property to the state it was prior to the claim, without any depreciation deduction. Buying this type of insurance costs you no more than 20% more a year and covers stolen, lost or destroyed items. It’s definitely worth carrying comprehensive homeowner’s coverage.
GUARANTEED REPLACEMENT COST – Again, there’s a great deal of confusion between guaranteed replacement cost and full replacement cost. They are not the same. The latter is related to your contents and the guaranteed replacement is related to the buildings and structures. With guaranteed replacement cost your insurance company agrees to pay for the damage even if it exceeds your policy’s limit, because they are obligated to rebuild or fully replace your property without any depreciation deductable. However, with this type of coverage insurance companies always include a clause that maximizes how much they will pay out, and it is generally no more than 20% above the value you have your home insured for. If you want to be sure you get what you had in the event of a claim, this is the best insurance to have. If you have not had an appraisal of your home in the last decade, it would be a good idea to do so. That way you can make sure you have adequate insurance and are not underinsured, which can create a great deal of problems should you have a claim.
RIDER – A rider is an insurance addendum that is added to your existing policy to cover specific items that are not covered or not fully covered under your insurance company. Often, people will buy a rider for their jewelry. You should make sure you have either the receipt or an appraisal for the item you are buying a rider for. A rider allows you to make sure that you will have proper coverage for a specific item(s).
Your home insurance policy is the only thing you have to protect you should something ‘bad’ happen. We always hope that we never have to make a claim. Having the right insurance will give you ‘peace of mind.’
Carlos Villalobos Insurance
25001 The Old Road
Santa Clarita, CA 91381
Office: (661) 255-8282
Cell: (661) 904-1830