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Insurance Agent

🏠 Home Insurance 101

Know what you are (and aren’t) getting: The recent wildfires in California are creating an insurance nightmare for many property owners whose homes have been severely damaged or completely destroyed.  And, a great many fire victims are learning that what they’re likely to get from their insurers won’t be enough to cover the losses. Getting comprehensive and affordable insurance has been increasingly difficult – but this is an important time for everyone to review their policies to know what losses will be covered - and which will not.

Ten Key Things to Know:

1. Deductibles and out-of-pocket costs – The deductible is the amount of money a homeowner pays before their insurance company pays for a covered claim. Deductibles can be a fixed amount or a percentage of the home's insured value. When you've met the deductible, you may be responsible for a percentage of covered costs (aka coinsurance). These payments count toward your out-of-pocket maximum.

2. Actual Cash Value (ACV) – This is some of the worst coverage you can get. It is typically the value of your home or belongings after accounting for depreciation. In many cases it comes nowhere close to the cost of replacement.

 

​3. Replacement Cost Value (RCV) – This is coverage of the cost to replace something as new or in equal value. The reimbursement you receive, however, may be based on the value initially deemed by the insurance provider or the determined value of the dwelling or personal property.

 

4. Guaranteed Replacement Cost – This is the best, but costliest option. If you experience a total loss on your home and must rebuild, the amount you receive is not limited/capped at the total amount of the replacement cost. If you have this coverage you are entitled to guaranteed replacement cost – which is supposed to cover the rebuild no matter the cost - meaning you would still be covered if the costs exceed the estimated cost.

 

5. Are you underinsured? – You may be underinsured at the start of your policy - or it can happen with time. Studies have estimated that up to 75% of homeowners nationwide may be underinsured. This can mean not only having less than enough insurance to cover a claim, but also the insurance company may calculate payment on a loss based on the percentage of coverage you have. Knowing the cost of repair/replacement and keeping it updated for your policy is crucial.

 

6. Coverage Limit – The maximum amount your insurance will pay for a covered loss.

 

7. Additional Living Expenses (ALE) – Check to be sure your policy has adequate coverage for temporary housing, meals, and other costs if you’re displaced.

 

8. Exclusions – Gone are the days of “all risks” policies that covered all risks. Typical exclusions are for earthquakes, floods and hurricanes. Some policies cover foundation issues, roof leaks, plumbing failures and damage to fences, while others do not. Pest damage is also not typically covered. Exclusions may also include damage from the backup of a sewer line, power surges caused by a utility, smoke, business liability, intentional damage and war or other government actions.

 

9. Occupancy – Who is living in your home directly determines the type of policy you should have. There is a different policy for people who own and live in their home as opposed to people who own a home that they are renting, or even people who own a home that nobody lives in.

 

10. Personal Property – Personal property is usually covered by a homeowners’ insurance policy as a percentage of the overall limits for the dwelling. But….insurance for high value items, jewelry, artwork and collectibles will require additional endorsements.

 

🔑 For more tips and resources, click HERE.

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