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Property Insurance
Property insurance is something mandatory when you purchase a home and will protect you and your belongings in case of disaster. As you start comparing insurance coverage, you need to look at two options – market value and replacement cost. These two types of coverage are very different so it is important that you understand the difference for your home and personal property.

Fair Market Value

Because the value of a home will increase or decrease over time, it is important that you maintain insurance that is adequate. For example, if your home has increased in value by $5,000 in the past year, you want to make sure your insurance policy is updated to cover this new increase. Additionally, if you have added a $3,000 big-screen television to your home, you want to let your insurance agent know so the content coverage can be appropriately increased. Market value coverage would be based on supply and demand of homes in the same area where you live, current employment levels, commercial buildings around your neighborhood, and other factors.

Replacement Coverage

On the other hand, replacement insurance would cover the cost it would take to rebuild your home at current prices should something happen. Additionally, this type of insurance would also cover the content of your home. Therefore, if you purchased your big-screen television two years ago for $1,500 but to replace that same television or something comparable you would have to pay $2,800, the insurance would pay you the $2,800 replacement value.

By working with a reputable insurance agent or company, they can help you determine exactly the type and amount of coverage needed for your home. It is also important for you to let your agent or company know of specific things within the home. If you own antiques, take photographs, have appraisals done, and put one copy in a safe deposit box and send the other copy to the insurance. Jewelry is another consideration as well as firearms, rare collections such as coins or stamps, and so on. Depending on what the content is, you may be required to purchase a separate policy apart from your normal property insurance.

Property insurance plays another important role. It can protect you from being sued and losing everything you own. For example, if you have children of any age, friends will come over to play. Should something happen to one of the friends, falling down, being bitten by your dog, etc., if that child requires medical treatment, your property insurance will pay. In the case of a dog bite, it is possible that you would need a separate policy.

You also want to ensure that your replacement cost insurance is designed to cover building code endorsements. In this case, if your home should burn to the ground or be damaged by a tornado or something that would require it to be rebuilt completely, the building codes for the reconstruction would have to meet today’s guidelines and not those from 30 years ago when your home was built.

Talk to your insurance agent or company and start by purchasing a guaranteed replacement cost policy. If you want to save money, you should increase your deductible from $500 to $1,000, and even though you might have an existing agent or company, it does not hurt to do some comparison-shopping.

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