Better insurance starts here

Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis. When “actual cash value” is used, the policy owner is entitled to the depreciated value of the damaged property. Under the “replacement cost” coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.

Here’s a checklist of things you should consider when you purchase homeowners insurance:

1. Determine the amount and type of insurance that you need. The coverage limit of your house should equal 100% of its replacement cost. If your policy limit is less than 80% of the replacement cost of your home, any payment from your insurance company will be less than the full cost to replace your home. You’ll have to pay the rest out of your own pocket. Also, decide if the personal property and personal liability limits are adequate for your needs.
2. Determine which, if any, additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement, an earthquake endorsement, or a jewelry endorsement?
3. Once you’ve decided on the coverage you want in your homeowners insurance policy, consult us. We’ll be able to help you determine if there are any gaps in coverage you might not have been aware of and explain the details of the policy’s exclusions and limitations, as well as recommend an insurance company that will live up to your expectations.

*Note: this answer is based on the Insurance Services Office’s HO-3 policy.

A: The dwelling and other structures on the premises are protected on an “all risks” basis up to the policy limits. “All risks” means that unless the policy specifically excludes the manner in which your home is damaged or destroyed, there is coverage. The policy limit for the dwelling is set by the policy owner at the time the insurance is purchased. The policy limit for the other structure is usually equal to 10% of the policy limit for the dwelling.

Losses to your personal property are covered on a “named perils” basis. “Named perils” means that you have coverage only when your property is damaged or destroyed in the manner specifically described in the policy. The policy limit on the coverage is equal to 50% of the policy limit on the dwelling. Limits for the coverage for the additional expenses that the policy owner may incur when the residence cannot be used because of an insured loss is equal to 20% of the policy limit on the dwelling.

The coverage limit on personal liability is determined by the policy owner at the time the policy is issued. The coverage limit on medical payments to others is usually set at $1000 per injured person.