The best thing to do in order to ensure that you have purchased the right insurance is to first determine your risks. Then, as you follow along on this web site, you'll learn how to make the informed decisions that will help you purchase exactly the coverage you need — not too much, not too little.
Property insurance is meant to cover the things you own, such as building, furniture or additional structures.
Primary Coverages for Property Include:
- Personal Property
- Loss of Use
Liability insurance protects your financial well-being by providing coverage for lawsuits for bodily injury or property damage for which you or your family are responsible.
Personal Liability Includes:
- Medical Payments
- Bodily Injury Liability (You broke my arm)
- Property Damage Liability (You broke my stuff)
- Personal Injury Liability (You damaged my reputation)
How much insurance do I need?
It is important, first of all, that you know the value of your home and its contents so you can insure yourself appropriately. You should also give careful consideration to the amount of deductible you choose, as this is the amount you are responsible for paying when a claim is made. The last thing you want to be is under‐insured.
Insurance policies have set amounts that determine the value of the property and set a maximum that will be paid in the event of a total loss. Careful consideration should be given to these amounts (referred to as “limits”) when purchasing a policy.
There are varying limits of coverage available in a policy. Some limits are grouped with an underlying per‐item limit. Reviewing these limits with respect to your property or situation is critical. For example, your standard Homeowners policy has limitations for theft of items such as jewelry, silverware, and guns. Based on your personal situation, you may want to consider increasing some of these limits.
Full Replacement Cost vs. Actual Cash Value
Full Replacement Cost coverage is preferred to Actual Cash Value coverage. Here’s why: Actual Cash Value only pays what an item is worth today – after depreciation. So if you purchased a $5,000 plasma TV, and it is now worth $2,000, Actual Cash Value will only pay $2,000. Full Replacement Cost coverage will pay you the whole $5,000 to replace that same TV. Full Replacement Cost coverage may cost a little more, but it provides your best chance to replace what you’ve lost. As you can see, this is a very important consideration when purchasing insurance.
It’s important to note that your basic Homeowners policy provides coverage for personal property only at Actual Cash Value.
Insuring to the right value
As a homeowner, there are several different values you have to think about: market value, assessed value, and replacement value. Market value fluctuates depending upon what a seller and buyer are willing to come to terms on. Assessed value is what the tax appraiser’s office bases your property taxes on. These two values include the land and the structure.
From an insurance standpoint, the most important value is the replacement value. This amount is determined by using a formula based on the construction costs in your particular zip code. In effect, this is what a contractor would charge to rebuild your house today with materials of like kind and quality.
It’s important to insure for the full replacement value of the home so that you will be covered in the event of a total loss. The land value is not included in replacement value because only the structure is insured.
There are many additional coverages available that vary by policy. These options can be used to customize your policy to meet your coverage needs. We recommend that you discuss your specific situation with your agent. Examples of some additional coverages are listed below:
- Ordinance or Law
- Dog Liability
- Water Backup
- Money & Security
- Employment Theft
- Business Interruption