In this day and age, buying homeowners insurance is a necessity due to natural or human related catastrophes. When buying insurance for the home however, there is much to consider and many points within the policy that should be analyzed closely. Paying attention to the details will insure that you have enough coverage for your home and possessions and are not paying too much for it.
One of the first things most people look at when buying homeowners insurance is their premium, which is the actual amount that the insurance will cost. Looking at the premium alone however, does not always paint an adequate picture of the facts of the policy and the overall cost may be affected by many different variables. One of the main factors that effects the premium amount is the deductible cost, which is the amount that a homeowner will have to pay out of pocket before the insurance policy takes care of the rest. In most cases a higher deductible means lower cost throughout the term of the policy but keep in mind this is what will have to be paid before insurance takes care of the rest.
The replacement cost is another factor to look at closely, and it is important to understand how this differs from actual cash value. There are two types of replacement costs within insurance policies, and those are the cost to replace the dwelling and the cost to replace the contents. The replacement cost of the dwelling depends upon it’s market value and the appraisal that is done on the home before the policy is issued. The replacement cost of the contents is determined using the given value of the possessions inside that are covered by the policy. Those items that aren’t compensated for are called exclusions and may include a great number of things.
Another important factor to look at in the policy is the depreciation clause, which may limit the amount of coverage you will receive over time. This is due to the loss of value that items suffer over time, and may greatly reduce the payment by the company when such items are stolen or destroyed. It is also important to note that home owners insurance doesn’t cover the cost of land, but only the home itself and any items inside that may potentially qualify for coverage. While keeping these specific terms in mind, be sure to look over the policy closely and make sure that there is enough coverage available to protect your home and it’s contents without having to pay too much.