Homeowners Insurance - All About Repair and Replacement Coverage
Today, many homeowners believe their personal homeowners insurance policies provide for the complete replacement of their homes, regardless of the cost to repair or replace it. In fact, that may not really be the case. This is important, since surprisingly, many homes out there are underinsured, a problem compounded by a rapid increase in building material costs.
All homeowners insurance companies provide, in some fashion, for the rebuilding of their insured's home if they are damaged or destroyed. However, the extent of how much your company will pay is determined by the coverage you have purchased. Different types of coverage settlement options include:
In order for you to receive these valuable benefits, such as “no cap” or “extended limits” loss settlement, you need to make sure your home is insured for 100% its current replacement cost. You will also want to select the inflation protection feature, which is based on a building reconstruction cost index. Your insurer will also require you to promptly notify it of any substantial addition or remodeling of your home.
As an added precaution, it’s important to review the amount of your dwelling coverage with your insurance agent periodically—regardless of the option that you choose—to ensure that you are insured to your home’s replacement cost. By securing the facts and making certain that the coverage you’ve selected is the coverage you want, you can help achieve greater peace of mind about your financial decisions for years to come.
All homeowners insurance companies provide, in some fashion, for the rebuilding of their insured's home if they are damaged or destroyed. However, the extent of how much your company will pay is determined by the coverage you have purchased. Different types of coverage settlement options include:
- Most policies pay up to the dwelling amount of insurance specified on the Declarations Page. These policies will not pay for any repair costs that are above and beyond the dwelling limit.
- Many policies are written with an “extended limits” endorsement that enables the policy to pay an additional 20 percent or more, but no more than that specific additional limit. If the cost of repairing or replacing your home exceeds the “extended limit,” no additional payments will be made.
- Some policies provide an option for rebuilding the dwelling, and will pay the amount actually spent to repair or replace the damage without a pre-set limit. This “no cap” loss settlement is the best dwelling repair and replacement coverage available, and is commonly known as “full value replacement cost” coverage. This means the coverage limit equals the repair or replacement amount needed at the time of loss, without depreciation, but subject to the deductible.
In order for you to receive these valuable benefits, such as “no cap” or “extended limits” loss settlement, you need to make sure your home is insured for 100% its current replacement cost. You will also want to select the inflation protection feature, which is based on a building reconstruction cost index. Your insurer will also require you to promptly notify it of any substantial addition or remodeling of your home.
As an added precaution, it’s important to review the amount of your dwelling coverage with your insurance agent periodically—regardless of the option that you choose—to ensure that you are insured to your home’s replacement cost. By securing the facts and making certain that the coverage you’ve selected is the coverage you want, you can help achieve greater peace of mind about your financial decisions for years to come.
