Homeowners Insurance Market Value vs. Replacement Cost:A market value policy would pay you the market value of your home as it is worth on the market today.
A replacement cost policy would pay you the amount of money it would take to replace your home using similar quality construction materials, without taking depreciation into consideration.
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Optional Homeowners Insurance Coverages You May Want to Ad:
Extended Replacement Cost coverage provides coverage in addition to the coverage automatically included in the standard policy and is generally limited to 20 or 25% of the home’s value.
This line of coverage is typically added to each homeowners policy so that a person’s contents will be covered on a replacement cost basis instead of an actual cash value basis.
This endorsement provides coverage to protect the policyholder against inflation. If the replacement cost of a home is steadily increasing with inflation, the policy amounts must also be increased to maintain coverage of at least 80% or higher.
If you purchase a policy today that would cover at least 80% of your home replacement cost, that amount may not be enough to cover it in the future due to inflation. To keep up with inflation, this endorsement allows the insurance company to automatically increase the policy’s limit throughout the policy period and upon each policy renewal by a pre-determined percentage.
The Scheduled Personal Property Endorsement or personal article floater covers valuable possessions such as fine art, jewelry, antiques, collectables, silverware, musical instruments and other high value items that may exceed the amount covered by the standard policy.
To make sure these high value items will be covered by your policy, they must be itemized and specifically listed under the Scheduled Personal Property Endorsement form.
Under the Secondary Premises & Liability Coverage endorsement, homeowners coverage may be applied to another property such as a vacation home. Secondary residences are not typically covered by the same homeowners policy that covers your primary residence.
The watercraft endorsement provides personal liability and medical expense coverage to watercraft such as jet skis, yachts, small sailboats, and outboard motor boats.
This endorsement provides coverage for losses due to identity theft.
Standard homeowners policies do not not cover damage as a result of an earthquake. For an additional premium, the earthquake coverage endorsement may be added to a homeowners policy and provides coverage for earthquake damage with a special deductible that applies to each separate line of coverage.
Typical Homeowners Insurance Forms:The HO-1 form is the most basic homeowners insurance policy, and only provides coverage for 10 specifically named perils, such as fire, theft, and vandalism.
This form only covers damage caused by 16 specific perils named in the policy. The distinct named perils include damage caused by fire and lightning, weather related perils such as wind or hail, theft, vandalism, damage from vehicles or aircraft, explosion, riot or civil commotion, glass breakage, smoke, building collapse, rupture or bursting of pipes, and falling objects.
The HO-3 is the most popular and comprehensive of all the homeowner forms. This form covers damage damage caused by all perils unless specifically excluded in the policy. The most common exclusions are flood, earthquake, mudslide, landslide, and acts of war.
A fire and extended coverage policy is a very basic policy that covers only your home and no other structures or personal items on your property for losses due to a few specific named perils. Other structures on your property, such as a garage or shed or your personal items, may be available for coverage under certain endorsements offered by your insurer.
A dwelling policy is a basic policy that provides more coverage than a fire and extended coverage policy, however your personal property is not covered under a dwelling policy.
A mobile home insurance policy is a specific policy written just for mobile homes that includes coverage for the home itself, as well as theft and liability coverage.
There is a specific policy written just for renters called the HO-4 or Tenants Form. It does not cover the actual building itself because the property owner would be responsible for insuring the structure.
The HO-4 or Tenants Form insures the personal belongings of the renter and also provides coverage for personal liability, loss of use, medical expenses, and additional living expenses.
Condominium associations typically purchase policies to cover the outside walls of a building and any other common walls and walkways. However, it is the responsibility of the condo owner to purchase an insurance policy to cover the part of the property that they own.
The HO-6 or Condominium Unit Owners Form provides coverage for the property owned by the condo owner and is similar to a homeowners policy.
