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Types of Home Insurance Coverage

Updated: Dec 6, 2021

What is your idea of a home insurance policy? If you think that all home insurance programs are the same, you better think twice. Not all of them are created equal; thus, you have to ask what is covered and what is not. Some may cover damages caused by the flood while others are limited to those that may be damaged by the fire or losses because of theft. Knowing the basics of the policy before making the final purchase helps you to manage your expectations and prepare for the worst that could happen too.

Although there is standardized coverage for insurance programs, the real name of the game is the difference. What makes one different from the other is the secret to getting the actual value of the payments that you make. Here are some of the basic types of insurance that you might want to consider:

•    Actual cash value of the property. This coverage includes the computation of the value of the house plus the value of the items that you own in it minus the depreciation value. Remember that the value of the home as well as the elements are computed based not on how much you paid when you made the purchase, but how much they are currently worth.

•    Replacement cost. Insurance companies also consider the actual value of your home without deducting its depreciation value. The cost to repair or rebuild your home is also one of the things that companies consider when they compute for the coverage of your property.

•    Guaranteed replacement value of the property. The most comprehensive computation of the value of the property with enough buffer to work on is considered whenever they compute for the coverage. Insurance companies also set a limit as to the extent of the coverage based on the value.

But one thing remains true for all home insurance policies – the least costly one will also offer the least amount of coverage. So if you think going for the cheapest coverage is the best way to go, you better think again. Some of these standard homeowner’s insurance programs may not be giving you the value for your money. The most expensive home insurance policy also provides the most coverage. If you want to make sure that you get the value of what you pay for, always ask for the specifics of the policy before you get insured.

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