Your Homeoowners Insurance
Your Homeowners Insurance coverage- Replacement v/s Repair Cost Policies
Homeowner’s insurance policies contain two primary parts: 1. Property insurance, which protects your home and personal belongings in case of fire, theft, vandalism, etc. 2. Liability insurance, which protects you in case you or someone in your family causes property damage or injury to someone else. The part that differs the most between policies and between companies is property insurance. There are two types of homeowner’s insurance policies offering different kinds of property protection: replacement cost policies and repair cost or market value policies. Both types offer the same kind of liability protection. The two types differ in the amount and type of property protection coverage. Following is a description of the two types of homeowner’s policies.
Replacement Cost Policy:
Replacement cost policies are what most people mean when they refer to as standard homeowners insurance. This type of policy generally provides more complete coverage for your money. The amount of insurance you buy is based on what it would cost to replace your property. A replacement cost policy will pay the amount needed to replace, rebuild or repair your damaged property to its original condition with materials of the same kind and quality. For example, if your hardwood floor is damaged, it can be replaced with the same type of wood. If you do not repair, rebuild, or replace the damaged property, the insurance company is only required to pay you what the property was worth before the damage. This amount will be less than the replacement cost because it will subtract an allowance for depreciation. By law, a company can refuse to sell you a replacement cost policy if your property is not worth at least $15,000. You can also be turned down for this type of policy if you refuse to buy enough insurance to cover 80% of the replacementcost of your property. Frequently, damage to property does not result in a total loss. Insuring at least 80% of the replacement cost of your home will cover most losses that may happen. Most companies require you to carry insurance equal to at least 80% of the replacement cost of your home or else they will not pay the full cost of repairing, rebuilding, or replacing a partial loss. If you do have a serious or total loss, you will not be paid more than the total amount of the policy. When the cost of replacing your property is much higher than what it is currently worth, an insurance company may not want to sell you a replacement cost policy. If the company chooses not to offer you a replacement cost policy, it must offer you a repair cost policy instead.
Repair Cost Policy:
This type of policy pays to replace, repair or rebuild your damaged property to a condition similar to what it was before the damage, using modern materials. For example, your damaged plaster walls may be replaced with drywall. Like the replacement cost policy, the repair cost policy also requires that the property be repaired, rebuilt, or replaced. Otherwise, you will be paid only the depreciated value of the property before it was damaged. If you have a serious or total loss, you will receive no more than the maximum amount of the policy, which is the market value of the property. This will likely not be enough to repair, rebuild or replace the property to its original condition. In order to qualify for a repair cost policy through a regular company, your property must be worth at least $7,500 and you must buy an amount of insurance equal to the property’s market value.
How To Decide What You Need:
When you are deciding which type of policy suits your needs, consider what your house is worth, how much it would cost to replace it, and how much you can afford to spend for insurance. For example, if you have a newer house, you probably would want to return it to its original condition if it were damaged. In this case, a replacement cost policy would be a good choice. On the other hand, because older homes are often built with unusual, hard-to-get or expensive materials, they sometimes have a very high replacement cost. They sometimes do not have an equally high market value, however. If the market value is small when compared to the replacement cost, and it is not important to return the property to its original condition, you may wish to buy a repair cost policy. In the case of a partial loss, for many people a repair cost policy will provide the same coverage as a replacement cost policy. If you have a total loss, which is less likely, a repair cost policy will pay you the market value of your home. And will probably not be enough to replace it.
Both the repair cost and the replacement cost policies protect you from a wide variety of possible losses, and protect both buildings and their contents.
What To Do If You Cannot Get Homeowners Insurance From a Regular Company:
Remember, if one company or one agent does not offer you the type of policy you need or require, shop around. Be sure to get the best combination of price, coverage and service for your money.
What To Do If You Have A Question Or Problem:
If you have an insurance question, call your insurance agent, (the one who sold you the policy), or call the carrier direct. National Association Of Insurance Commissioners:
Flooding and storm damage:
Is my home covered?
Homeowners Policies Do Not Cover Flooding:
Because there are a wide variety of homeowner policies available, be sure to read your policy or discuss it with your insurance producer (agent) or insurer to determine exactly what’s covered and what isn’t covered.
Q & A:
Q: Is flooding from weather covered by my homeowner policy?
A: No. Flooding is not a “covered peril” under most homeowner insurance policies.
If a covered peril, such as a sudden release of water "broken pipe", or wind or hail, causes damage to the structure and allows rain inside the building, or caused damage to the structure the resulting water damage would be covered by your homeowner policy, but not damage caused by whether related flooding.
Q: Does earthquake insurance cover flooding or a tsunami?
A: No. A flood or tsunami resulting from an earthquake is not included under earthquake coverage. Q: Since most homeowner policies don’t insure against flooding, where can I find coverage?
A: Flood insurance may be purchased from the National Flood Insurance Program (NFIP).
Q: How do I buy flood insurance?
You can purchase flood insurance from a licensed private insurance company or independent property and casualty insurance producer (agent).
If your insurance agent is unfamiliar with the NFIP or is not licensed to sell national flood insurance, search the NFIP’s Web site for agents or companies in your area, or call NFIP direct at (888) 379-9531.
Q: How soon do I need to buy flood insurance?
A: In general, a policy does not take effect until 30 days after you purchase flood insurance. You won’t be insured if you buy a policy a few days before a flood.
Q: If my home is flooded, won't federal disaster assistance pay for my damages?
A: Federal disaster assistance is available only when the President declares a disaster. Federal disaster assistance is usually a loan that you must pay back with interest. For a $50,000 loan at 4 percent interest, your monthly payment would be about $240 a month or $2,880 per year for 30 years, in addition to your mortgage loan that you may still owe on the damaged property. In addition, you would need to buy and maintain flood insurance for the life of the loan. Compare that cost to the average premium for $100,000 of flood insurance coverage, which is about $500 a year (less than $42 per month). When you submit a flood insurance claim, you are compensated for all covered losses whether or not a disaster is declared.
Q: How much flood insurance can I purchase for my house and how much will it cost?
A: Residential insurance for one- to four-family unit buildings and individual residential condominium units are written up to $250,000 in building coverage and up to $100,000 in personal property coverage. Your premiums will depend on your location (flood zone) and the coverage limits you select. Visit NFIP’s Web site to get an estimate of how much flood insurance will cost for your property. Q: What is a flood zone?
A: Flood zones are designated by the Federal Emergency Management Agency (FEMA) based on the risk of flooding. You can find out what flood zone your property is in by visiting the NFIP’s Web site or by contacting your insurance agent or company, or your city or county planning department.
Q: I live in a low-risk flood zone. Do I really need flood insurance?
A: You should consider getting flood insurance even if you live in a low- or moderate risk area. Almost 25 percent of all flood insurance claims come from areas with low or moderate flood risk. FEMA cites the fact that over the period of a 30-year mortgage, you have about a 9 percent chance of experiencing a fire, and a 26 percent chance of experiencing a flood. That translates to about a three times greater likelihood of experiencing a flood. You may qualify for the Preferred Risk Policy, a low-cost flood insurance policy.
Q: What if I want to purchase more insurance than the NFIP offers?
Many private insurance companies offer excess flood protection, which provides higher limits of coverage than the NFIP, in the event of catastrophic loss by flooding. Q: Why does my mortgage lender require me to buy flood insurance?
A: Flood insurance is mandatory for all federal or federally-backed financial assistance for the acquisition and/or construction of buildings in high-risk flood areas (special flood hazard areas or SFHA’s). Flood insurance must be maintained during the term of the loan and is required for the lesser of the maximum amount of available NFIP coverage or the outstanding principal balance of the loan (less the land value).
Q: Can I get flood insurance if I'm a renter?
A: Yes. A renter can purchase contents coverage up to $100,000. Q: Can businesses purchase flood insurance?
A: Yes. Coverage limits for a standard flood insurance policy for a business are $500,000 for the structure and $500,000 for contents.
Q: Will a flood policy cover damage to my car?
A: No. Flood damage to your car would be covered under you auto insurance policy if you have purchased comprehensive coverage. Other sources of information about flooding and flood insurance include:
The National Flood Insurance Program’s Web site, which explains how to obtain flood insurance, how much it costs, what it covers, how to file a claim, and much more.
CENTER4RESTORATION, is Arizona's premier Water Damage Cleanup and Restoration Specialists since 1996. Our staff is highly experienced and certified in the fields of water damage mitigation, mold remediation, and state of the art structural drying technology.
We specialize in working closely with your insurance carrier and coverage so you dont have to cover any costs out of pocket. Ww bringing your home or business back to normal.
Back to top
