For most people, their home or business will be their biggest investment in life. Home owners insurance protects your investment, but many people have questions when it comes to picking out a property insurance plan. Here are some important facts and information about insurance policies and coverage for your property. We will also examine the various add on and riders that offer you additional protections for the risks and perils that standard property insurance does not cover such as special flood and hurricane policies.
The first step in picking out the right insurance policy for you is to pick out a policy that ensures your home for at least 100% of its estimated replacement cost. To do this, get a professional estimate for the replacement cost of your home, then select a coverage amount that suits your needs. it should be noted that the replacement cost if vastly different that the market value of a property. The market value of a property is the cost a buyer pays for the home and the land it sits on. It does not factor in current labor costs, materials costs, the homes purchase cost, not does it include the value of the land that the house sits on. For insurance policies, replacement cost is simply the expenses and cost to repair or replace the entire home following some peril such as a fire which heavily damaged or destroyed the home.
Replacement costs do not factor in any of these:
* The cost of the building at the time of purchase.
* The market value of home.
* Any outstanding mortgage loans, property liens or second mortgages on the property.
* The cost of the land itself.
To obtain the replacement cost of your home, you can consult with your local home builder association or a reliable home construction company for an estimate that factors in currant labor costs and material costs. If you are in the process of buying a new home, you can ask for the replacement cost estimate when you have the property appraised. You can also ask your insurance company for assistance in determining the right coverage amount.
Every few years you should get the replacement cost of your home reassessed. There are many factors that can raise or lower the cost of replacing your home. Market conditions in your neighborhood or geographical location can affect the cost of replacing your home. Replacement costs are influenced by the cost of labor, labor demands as well as the cost of building materials in your geographical location, and these factors tend to change at least every 5 years. Inflation even has an effect on the replacement cost, and certain factors can raise that rate, such as severe weather and natural disasters in your geographical location which would increase the cost of labor and materials.
– image source, http://extremecleanupservice.com
Besides regular property insurance you may want to consider additional coverage such a flood policy. Home owners insurance will not cover flood damage, and the United States has been seeing a record amount of property damage due to floods. Flood insurance is affordable with the average premium for a flood policy in the U.S. priced around $540 a year, according to the National Flood Insurance Program.
Many insurance companies are now excluding any hurricane damage claims. You can however buy Hurricane Insurance. hurricane insurance costs will vary greatly in cost based on geographical location, age, condition of your home as well as other factors. If you live in a hurricane prone state such as Texas, Florida and Louisiana, you may want to consider this coverage to fully protect your investment. The annual premium cost for a property insured for $150,000 can be as low as $3,000 and would fully cover your property in the event of hurricane damage.