So you’ve bought a house? Hooray! Your first order of business is to celebrate with your favorite dinner! But what is your second order of business? Acquiring homeowners insurance to protect yourself against a total loss in the case of a natural disaster or calamity.
You may be questioning “Would that really happen to me?” And the good thing is, it likely won’t. But your home is one of the greatest investments you will ever make, and it is also the place where you live and store your most precious belongings. You can’t afford to take the risk of not carrying proper insurance.
In the event that something terrible does happen, without coverage, you will be responsible for replacing your home and all your belongings entirely out of pocket. This means the total cost to rebuild your home, including the cost of materials and labor, will fall squarely on your shoulders. Can you afford the rebuilding costs? If not, you need adequate insurance coverage.
But how much insurance do you need? Is all home insurance the same? Are all types comparable?
Here’s a brief breakdown of your options.
Types of Homeowners Insurance Coverage
All home insurance coverage is not the same. There are basically four types of coverage that insurance companies offer to rebuild your home after a covered loss. Home insurance is not one-size-fits-all and the type of coverage you select should be based on your budget, assets, and amount of risk. But, some coverage is better than others.
Lowest Coverage: Actual Cash Value
The value of your home as a whole should appreciate over time, but the actual materials that your home is made of and the belongings you own depreciate over time due to age and wear and tear. Therefore, the type of coverage your policy includes matters when it comes to replacing the materials of your home and belongings.
The lowest and most affordable type of home insurance is actual cash value coverage. This covers the cost of replacing items including depreciation. This means, if you have to replace something, your insurance company will not pay for the new cost of that item, only the amount the item costs in the first place. In this situation, insurance coverage does not cover the full amount of replacing the item and homeowners have to make up the difference out of pocket.
Good Coverage: Replacement Cost Coverage
To protect yourself from having to pay a large amount to rebuild your home, a better option is to carry replacement cost coverage. This type of coverage may cost more in premium costs or deductibles but can save you money in the long run because it ensures that your insurance company will pay the cost to replace materials at their current cost, without factoring in depreciation. This coverage can save your pocket and peace of mind.
Better Coverage: Extended Replacement Cost Coverage
Unfortunately, carrying replacement cost coverage is not always enough to save you from having to pay out of pocket to rebuild. The costs of labor can rise dramatically, especially in a high-demand scenario such as a natural disaster that affects a broad area. Your policy will only cover rebuild costs up to your dwelling coverage limit, therefore if costs rise past the limit, you must pay for the difference yourself. When you select Extended coverage, your insurance company will pay an additional percentage above replacement cost, which can save you from having to pay the difference.
Best Coverage: Guaranteed Replacement Cost Coverage
This is the gold standard of home insurance coverage types. Guaranteed Replacement Cost covers the entirety of materials, labor, and construction costs regardless of how much it costs. This type of coverage is undoubtedly the most expensive coverage to carry and unfortunately, many insurance companies do not offer it. But, if you are willing to pay for it and want to be completely protected, you can likely find an insurance company to cover you.
How to Secure Home Insurance Coverage
Call our team at Gebhardt Insurance Group. Our agents are ready to speak with you about your insurance needs and can explain all your coverage options. We can even help compare rates from many different carriers to ensure you are getting the best deal available to you. Don’t wait until disaster strikes! Insure your home today.