By Shane Dekle
For many of us, buying a home may be the biggest investment we ever make. Since it is such a big investment, most of us purchase insurance to adequately protect it from loss. Unfortunately, many of us don’t actually understand the protection we are buying. Are you confident you have your biggest investment protected against unforeseen circumstances? Considering it is the biggest investment most of us will make and assuming you are serious about protecting that investment, below is some information to consider when determining how much insurance is needed or wanted.
Know the Difference between Market Value, Actual Cash Value, and Replacement Cost.
Market value is the amount a buyer would pay for a home, including the land, regardless of how much it would cost to rebuild the home. Actual cash value (ACV) refers to insurance that covers your home and possessions for market value at the time of a loss, and depreciation will be factored into any claim. For example, a roof that is predicted to last 30 years will be assumed to have zero value at the end of that timespan. So if the roof is somehow destroyed 15 years after installation, the ACV will be half of the original cost of the roof. Replacement cost is the cost necessary to repair or replace the entire home. Using the same example, if your 30 year roof is destroyed 15 years after installation, replacement cost is the cost to repair or replace your roof. Replacement cost is not the market value of the home, the home’s purchase price, the cost of the land, or the outstanding amount of any mortgage loan. Not all homeowner policies are created equal. Some have actual cash value for the entire structure, or for part of the structure such as the roof, and others have replacement cost for everything. In most cases, replacement cost is the most preferred coverage, but might not be what you receive. Make sure you’re informed of which type of coverage you are buying or currently have prior to a loss!
Understand Personal Liability Coverage and know your coverage limit!
Injury and property losses from accidents can amount to judgments in the thousands or millions being awarded by juries. Your personal liability coverage provides protection for you if someone makes a claim or brings suit against you for bodily injury or property damage for which you are found responsible. Carrying adequate liability limits could protect you from losing your home, savings, and possibly part of your income in the event of an accident in which you are found negligent and a judgment is awarded.
Be aware of coverage limitations and exclusions within your homeowner’s policy.
Home insurance policies carry deductibles which vary from $1000 to three percent of dwelling coverage. Some home policies have different deductibles for different perils or structures. For instance, you may have a different deductible for your roof than you have for the rest of the home. Your valuables, such as silverware, jewelry, and firearms are usually limited coverage against theft. Sewer and drain clogging, resulting in backflow, are typically not covered unless you purchase an endorsement with the policy. Identity theft is on the rise and is not usually covered without additional endorsements.
Even if your home isn’t your biggest investment, it is most certainly worth protecting. Meet with your insurance agent prior to purchasing home insurance and so they can inform you of the coverage details and amounts. This way, you are able to make an informed decision on what best meets your needs. Conduct an annual insurance review with your agent at least once a year to help you determine if your coverage still makes sense, as well as to make sure you’re receiving all eligible discounts.
Shane Dekle is a native Athenian and a graduate of UGA’s Terry College of Business. He is married to Natasha and has two daughters, one son, a dog and several chickens. As owner of Shane Dekle State Farm, his primary focus is on ensuring his clients have the proper insurance protection and financial security plans in place to confidently achieve dreams and goals. Visit www.shanedekle.com for more information or call 706-543-8400.