Home Insurance

 

Home insurance is a broad term for a series of policies that provide the home owners with either property protection or liability coverage. Home insurance provides the owner or renter of a building and its belongings with financial compensation in the event of injury or theft, and to a person other than the owner or renter if that person is injured on the premises.

 

Understanding Home Insurance

 

There are three types of insurance coverage for properties: replacement cost, actual cash value, and extended replacement cost.

 

Replacement cost covers the same or equal value of the cost of repairing or replacing the property. The policy is based on the cost of repairs rather than the cash value of the products.

 

Actual cash value covers charges repair value to the owner or renter, minus depreciation. If the damaged item is 10 years old, you get a 10-year-old item value not a new one.

 

In extended replacement cost, the insurance provider will pay more than the coverage limit if the construction cost have increased. However, this usually does not exceed 25% of the limit. When you purchase insurance, the cap is the maximum amount of money that will be paid by the insurance provider for a given circumstance or case.

 

You may wonder why insurance rates vary even though the homes are in the same location, it is because the rates rely on the property details such as the property age, building design and background claims. Thus, the minimum cost of home insurance (excluding taxes) ranges from about 1,000 to 3,000 per year.