Regardless of the type of home or residence one is occupying, having ample homeowners insurance coverage is essential to protect your investment. In fact, home insurance is so important that buyers with any kind of mortgage are required by the lender to have a set level of minimum protection as set forth in the purchase terms.
Comprehensive policies such as the HO-3 level of coverage provides homeowners with options for insurance levels for the home's structure and options for protection against liability lawsuits concerning the property. However, there are add ons and supplemental protections available, too. Here are some home insurance basics that can help policy buyers get the coverage they need.
Home and Personal Property Coverage Options
Owners will want to have enough insurance coverage that allows them to rebuild the home or a similar one and replace their possessions in case a disaster causes the dwelling to become uninhabitable. Common homeowners insurance coverage options include:
Actual Cash Value—Provides replacement of the dwelling and personal property at their current value up to policy limitations.
Replacement Cost—While it can cost about 10 percent more than other policies, this type covers the full estimated replacement cost of the home and possessions up to policy limits without any depreciation deductions. With the rising cost of materials, it can actually cost more to replace your home than its current value, so this is a secure policy choice.
Guaranteed Replacement Cost—This policy covers the current replacement costs without depreciation deductions, typically up to 20 percent above the policy limits.
Personal Property Options—In general, personal property valuations are set between 40-75 percent of the structures value. However, those with costly valuables may need to customize their personal property policy or consider supplemental coverage.
Homeowners Insurance Policy Add-ons and Supplemental Coverages
The policies listed above typically offer coverage for perils such as:
- Lightning damage
- Fire damage
- Theft of personal property
- Certain types of water damage
- Food Spoilage during power outages sourced by the home
- Wind damage
- Hail damage
However, there are certain supplemental policy add-ons that can provide owners with additional security. Examples include coverage for natural disasters, on-property injuries, and living expenses if owners are displaced from their Novi homes.
Flood Insurance—Coverage for flooding can be obtained through insurance agents or directly through the government's National Flood Insurance Program.
Earthquake Coverage—Individuals living in earthquake prone areas should give this add-on serious consideration. While deductibles are typically high, coverage can be a huge benefit if this natural disaster causes significant home damage.
Additional Living Expenses—When serious damage occurs, homeowners may be displaced and need a place to stay while repairs are handled. This supplemental policy typically reimburses homeowners for the costs of boarding and dining expenses within coverage limitations, which is often 20 percent of the total policy.
Home Liability/Umbrella Insurance—Many policies already offer a minimum amount of liability coverage. This covers the defense of owners in case they're sued by a party injured on their property or who suffers from property damage caused by the policyholder, family members or pets. Some homeowners may opt to carry additional coverage under their umbrella policy.
Need More Home Insurance Policy Advice?
Depending on the type of home being covered there could be special considerations when choosing the ideal policy. Contact a local real estate professional to get more advice concerning home insurance coverage.