If you own a home, you need to not only be able to pay off the mortgage, but be able to replace your home if a catastrophe were to happen and your home were declared a complete loss. It is easy to forget how much time and money you spent getting into your home, but you are likely to remember that quickly when you are applying for a new mortgage. It is no longer sufficient to merely break even if the worst were to happen to your home; instead it is a good idea to carry homeowners insurance in excess of the actual value of your home.
Review The Value Of Your Home For A Standard Replacement Cost Policy
Although you may notice each year when you pay your taxes that the value of your home has gone up or down, it will be be beneficial to have the value of your home professionally re-evaluated once a year. That independent assessment is often more precise.
That is because your city or state will not usually see your home before determining its value, but instead will assess the value of your home based on:
- The value of other similar homes in your area
- Its physical characteristics
- Its aesthetic appeal
- The availability and sale of homes in your area
Know What Your Standard Policy Covers
A standard replacement cost policy is also known as a HO-1 policy. Specifically, it covers damage due to the following problems:
- Fires and resulting smoke damage
- Fallen trees
- Windstorm/Hailstorm/Tornadoes (unless excluded by area)
- Riots and civil disturbances
- Aircraft and vehicles, as well as any damage they cause
- Intentional damage and theft
Unfortunately, water damage from flooding is usually not covered by standard homeowners policies. In that instance, you should take out an additional policy of the same amount for the problems related to flooding.
Although exceptionally rare in the United States, if you were unfortunate enough to be impacted by a volcanic eruption, an HO-3 policy would cover the damage or replacement.
In addition, if you have items of exceptional value in your home, like jewelry or electronics, be sure to declare them when getting your policy, so you can replace them if necessary.
Choose An Appropriate Supplemental Policy
Once you know what the value of your home currently is and you have the HO-3 policy in place, it is time to obtain a policy for its extended replacement. This option is an arrangement between you and the insurance company where they provide you with coverage that pays a percentage above its actual value. You can obtain a policy that covers up to 20% above the existing insured value of your home.
In conclusion, the amount of insurance you carry on your home should exceed its value if you want to be able to replace it in the event of its all-encompassing damage or total loss. Therefore, you need to plan ahead by having enough of the right types of homeowners insurance.
For more information about home owners insurance, contact a company like Southern Family Insurance.Share