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With "replacement cost"
insurance the policyowner receives cash to cover a replacement
of similar type and quality and current market prices.
How much homeowners insurance
do you need?
Your policy limit will determine
how much coverage you have in the event of a disaster. If your
limit is set at 90% you will be reimbursed for all but 10% of
your replacement costs. It is important to note that if you
carry less than the insurance policy limit you must pay out-of-pocket
for expenses beyond your policy's deductible.
Some plans are specific as to what
type of damages they will cover. For example, a "named
perils" policy will likely cover natural disasters such
as fire, hail and wind. Where as an "all risks" policy
will cover any causes of loss not explicitly excluded by the
agreement. Be sure to read the fine print to be sure what perils
your insurance covers.
Earthquakes are typically not covered
under basic insurance policies. If you live in an earthquake
prone area you will need to add an earthquake endoresement to
your homeowners insurance policy. The earthquake endorsement
also covers damage from volcanoes and other earth movements.
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