Home Insurance FAQ

Below is a list of frequently asked questions about homeowners insurance. If you have additional questions that aren't answered in this FAQ, pleae Contact Us, our team would be happy to help.

1. Do I need homeowners insurance? 

   Homeowners insurance isn't mandated, unlike car insurance; however, depending on your lender, you may be required to keep homeowners insurance. Keep in mind, your home is most likely your largest investment and by insuring your home, you are protecting your investment.

2. What does a homeowners policy cover?

   Depending on the exact policy coverage you choose, a homeowners policy covers personal liability, medical payments to others, and accidental direct physical loss to structures and personal property. 

3. Who decides how much my property is worth in the event of a claim?

   State laws may dictate how losses are to be figured, which means the same insurance company may use one method in one state and a different method in another. Common methods are: 

   • Actual Cash Value: The replacement cost of the item minus depreciation. For example a new television may cost $500, but if your 7-year-old TV is damaged in a fire, it might have depreciated 50% prior to the damage. Therefore, you would be paid $250 for the TV.
   • Replacement Coverage: The cost of replacing an item without deducting for depreciation, but limited to a maximum dollar amount. Today's cost for a TV with features simliar to the 7-year-old TV damaged by the fire would determine the amount of compensation. If it still costs $500 today, that would be the replacement coverage. (It's important to remember that there are limits on this policy, and you need to keep up-to-date on your coverage).
   • Extended Replacement Cost: An extended replacement cost endorsement covers costs up to a certain percentage over the limit (often 20-25%). This common endorsement is a policy add-on, providing protection in the event reconstruction costs of the home are higher than it is insured for. 

   If you prefer replacement or extended replacement coverage, this can be added to a policy.

4. Does home insurance protect me if someone is hurt on my property?

   Liability may cover bodily injury and property damage to others due to your negligence.

5. Why is replacement value different than market value? 

   Replacement cost value should not be confused with market cost value. Market cost value is the figure assigned to your home if you were selling your home. Replacement cost value is how much it would take to rebuild your home, at today's costs. These two figures can be drastically different from each other.