Homeowners Insurance


The purchase of homeowners insurance is an important decision in protecting the value of the home and the wallet of the homeowner. Typical policies provide coverage for damage or destruction by fire, lightning, wind, hail and other specified events; exploision; ice and snow damage; vandalism; theft; riots; damage by airplanes; damage by vehicles; volcanoes; smoke; and falling objects. All policies cover personal belongings. If the home is temporarily uninhabitable, the policy pays for living expenses.

More comprehensive policies may also provide coverage for such events as damage caused by some electrical malfunctions and water damage caused by specified malfunctions to the heating, plumbing, air condtioning and automatic fire sprinkler systems as well as from appliances. All policies offer personal liability coverage, which pays if the homeowner or a family member is ordered to pay damages for injuring someone. Medical payments coverage pays the medical expenses of anyone injured at the home without the incident going to court.

Policies cover the repair or rebuilding of the home in the event of a major loss. The amount homeowners will get depends on the type of coverage chosen. The choices are actual cash value, replacement cost and guaranteed replacement cost. Actual cash value pays the cost for replacing the home minus depreciation, which is the loss in value to the home because its no longer new. Replacement cost pays for the repair or rebuilding at current costs without deducting for depreciation.

Choosing guaranteed replacement cost usually pays 20 percent to 25 percent over the current cost of rebuilding the home. This is useful in situations where because of a hurricane, for example, limited building supplies and labor may inflate costs. Since this option wont pay to rebuild the home in accordance with current building codes, homeowners may want to add a policy known as Ordinance or Law.