New homeowners often ask themselves, ‘am I properly covered by home insurance?’ and ‘what should home insurance cover?’ These are common and often nerve-wracking questions to ponder when making coverage choices for your home or reviewing your homeowner’s policy.
There are so many factors to consider:
- Do you have a basement in your home, should you consider flood insurance, does your insurance company offer flood insurance in your area?
- How much liability coverage should you have? Is $1 million enough these days or should you consider $2 million?
- What if the hot water tank lets go? Will you be covered for that?
- What if you have a break-in, what’s covered and what’s not? Are there limits to these coverages?
- Of course, most importantly, what if there is a fire? Is there enough coverage in place to replace your home? Do you want to replace your home?
Homeowners insurance and its various coverages often lead to homeowner’s feeling unnecessary stress and pressure to ensure their home is covered properly. The good news is, armed with the right tools, like the Douglas Residential Cost Guide, and the right agent/broker, understanding how much homeowner’s insurance you need can be made straight forward and provide peace of mind.
Decide What Homeowner’s Coverage Is Right for You
The biggest determining factor in ensuring your home is covered properly is to decide which type of homeowner’s coverage is right for you. Are you at the point where you’re no longer interested in replacing your house if something happened?
Actual Cash Value Coverage
If you don’t need or desire to replace your house in the event of a loss, actual cash value coverage may be an option best explored. Actual cash value will provide a payout in the event of a loss; however, it factors in depreciation and will not provide enough funds to replace the house in the event of a total loss.
Replacement Cost Coverage
If replacing your home is your highest priority, replacement cost coverage is the best way to proceed. Replacement cost coverage will cover any losses to your home up to the replacement value of your home. Depreciation is not considered with replacement cost coverage; the coverage is in place to simply replace what has been lost.
Determine Your Homes Replacement Value
What if my replacement value isn’t enough to replace my home? This is one of the biggest fears any homeowner has when pondering insurance. The best way to ensure your home is protected properly is to ensure your home’s replacement cost coverage is calculated correctly. Douglas Residential Cost Guide can help.
The Douglas Residential Cost Guide has been carefully crafted by industry experts with over 30-years of valuation experience in Canada. Utilizing the Douglas Residential Cost Guide to help navigate the questions your insurance provider will ask and allows you to compare calculations with an outside source to give you peace of mind that your replacement cost number is accurate. You can also speak to your insurance provider about guaranteed replacement cost insurance. Some companies provide guaranteed replacement cost insurance as a guarantee that they will replace your home in the event of a loss.
Guaranteed Replacement Cost Coverage
Guaranteed replacement cost coverage ensures your home will be repaired or replaced to put you in the same position you were in prior to the loss, regardless of the cost associated with the repair or replacement.
Of course, some insurance companies’ guaranteed replacement cost coverage is not available to homes over a certain age, or is not true guaranteed replacement coverage, but a promise to pay a specific percentage over and above the replacement cost value of the home, if necessary. If you’re interested in guaranteed replacement cost, asking your insurance provider what limitations/stipulations are outlined for this coverage is best.
Basement and Flood Coverage
Given common weather patterns across the country, basement and flood coverage is at the forefront of many insurance discussions. Are you properly covered in the event of a flood or sewer back-up? More importantly, what is the difference between flood coverage and sewer back-up coverage?
Sewer Back-Up and Sump Pump Coverage
Sewer back-up coverage is coverage put in place to cover water in your basement that stems from a sump pump malfunction or a toilet or drain overflow. Flood coverage is coverage put in place to cover damage from water that seeps in through the walls, up through the floors, or comes through a window or under a door. If you fear losses from either type of event, asking your agent/broker about sump pump coverage and its limitations is a must and enquiring about flood insurance in your area is a wise choice.
What if there is a break-in? Homeowner’s policies include special limits for contents coverage and can be subject to special limits in the event of stolen property. It is important that you discuss these limitations with your insurance provider to ensure ample coverage is in place. There may be a limit to how much can be claimed against your policy for jewelry, fine arts or furs. If the limits within the homeowner’s policy is not enough, a personal articles policy may need to be explored to cover any specialty items.
Discuss Liability with Your Insurance Company
Determining a liability amount is best discussed with your agent/broker. Most insurance companies will not insure a home with less than $1 million liability; however, carrying upwards of $2 million is not uncommon and should be explored based on your lifestyle and family needs.
Determine Your Home Replacement Cost with The Douglas Residential Cost Guide
The most important thing to remember when reviewing your homeowner’s policy, or shopping for new insurance is to take your time, ask questions and review the fine print. Starting with an accurate replacement cost value for your home is the best place to begin. Most of the coverages within your homeowner’s policy are based on a percentage of the calculated replacement cost value of your home; even if you have chosen actual cash value coverage, replacement cost is still calculated and used as a baseline within your policy. Now that you’re armed with the right questions and know where to start, it’s time to take action. Learn more about the Douglas Residential Cost Guide today to get started!