Protecting your residence from damages caused by natural disaster, theft, and other perils is key for the peace of mind and financial security of homeowners. First-time buyers may wonder what criteria makes for an adequate insurance policy. Understanding the types of available coverage and possible exclusions to that coverage are critical. Replacement coverage — The insurance policy should reflect a dollar amount that can pay for the cost of rebuilding and refurbishing the house if it is completely lost. As the homeowner, you can rely on the insurance company to calculate a replacement cost estimate or you can hire a home builder to provide an estimate based on their assessment. HomeGain Blog explains the three types of coverage:
- Guaranteed Replacement Cost Coverage – The insurer will pay for all rebuilding costs.
- Extended Replacement Coverage – The insurer will pay for rebuilding costs up to about 125 percent of the insured value of the home. For example, if the home is valued at $250,000, the insurer will pay up to $312,500 toward rebuilding it.
- Inflation Guarantee (or Guard) – This feature guarantees that the insured value of your home keeps pace with inflation rates in the marketplace.
Liability coverage — The insurance policy should reflect coverage for third party claims that can come in the form of an injury that someone incurred while on the premises or damages caused to neighbors’ properties. Coverage for valuables– Assets like jewelry and artwork are not typically covered by standard policies. Take inventory of your personal valuables, determine their value, and then buy extra coverage.