What Are The Basic Types Of Home/Property Insurance?

There are several types of home/property insurance, depending both upon your living situation and your need for protection from loss/harm. They are detailed below: 1. Property Damage: Property damage coverage helps pay for damage to your home and personal property. Other structures such as tool sheds, detached garages, houses and their contents are also covered. You should check with your agent or your insurance company to determine if the amount of coverage on other structures is sufficient. Personal property is the contents of your home and other personal belongings owned by you or family members who live with you. Home insurance policies may provide limited coverage for small boats; however, most home insurance policies do not cover motorized vehicles unless they are unlicensed and used only at your home. Your insurance agent or your insurance company can help you find appropriate coverage for your car, boat, snowmobile or other recreational equipment. Some forms of personal property, such as silverware, computers, guns, money, expensive antiques and jewelry, have limited coverage under your homeowner's policy and may need additional insurance. This coverage can be added to your policy as an endorsement. You can choose to insure your home and belongings for either replacement cost or actual cash value. These terms are explained below. Replacement Cost or Actual Cash Value? Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. Depreciation is the decrease in home or property value since the time it was built or purchased because of age or wear and tear. Many insurers require homeowners to insure their homes for at least 80 percent of the replacement cost. If the homeowner fails to insure for at least 80 percent of the replacement cost, a penalty is applied to partial losses. For example, if it would cost $125,000 to replace your home and it is insured for $100,000 (80 percent of its replacement value), and a fire causes $25,000 worth of damage, then your insurance company will pay the full $25,000. On the other hand, if your $125,000 home is insured for $75,000 (which is less than 80 percent of its replacement value), and you suffer a $25,000 loss, your company would pay for only part of the loss. You would have to pay the balance out of pocket. Your company would pay for damages based upon the following formula: Amount of Insurance Carried $75,000 = 3/4 or 75% Amount of Insurance Necessary $100,000 to cover assets (80 percent of $125,000) Using these figures, your company will only pay for 75% of your $25,000 loss. Hence, 3/4 x $25,000 loss = $18,750 paid by the company. You would have to pay the balance of $6,250. Insuring your home for at least 80% of its replacement cost is very important. Check with your agent or insurance company to see what is required. You may wish to insure at 100 percent of replacement cost so you will have sufficient coverage in the event of a total loss. Actual cash value is the amount it would take to repair or replace damage to your home after depreciation. For example, if your roof has a 20­year warranty and is 17 years old, there would be a depreciation for the age and condition of the roof. Most standard home insurance policies cover the contents of your home (i.e., personal belongings) on an actual cash value basis. Many insurers offer an option for you to insure your belongings at replacement cost. The premium will be slightly higher for this coverage; however, you may want to consider this option. Whether your home is insured for replacement value or actual cash value, it is important to keep track of its value. For instance, the addition of a room, new insulation and yearly inflation all increase the replacement cost of your home, while the actual cash value of the home may decrease over time. Additional Living Expenses Most home insurance policies provide additional living expenses that will pay some expenses if your home is damaged by an insured event to the extent that you cannot live there while repairs are being made, or if you are denied access to your home by government order. These expenses could include limited motel, restaurant and warehouse storage. Personal Liability This coverage protects you against a claim or lawsuit resulting from bodily injury or property damage (non­auto and non­business) to others caused by your negligence. This coverage applies to you and all family members who live with you. You should check with your agent or insurance company to determine if the amount of personal liability coverage is sufficient. Medical Payments Regardless of who is at fault, this coverage pays medical expenses for persons accidentally injured on your property by a member of your family or by your pets. Medical payments do not apply to your injuries or those of family members living with you or to activities involving your at­home business. You should check with your agent or insurance company to determine if the amount of medical payments coverage is sufficient. Insurance Forms An insurance form is another name for an insurance policy, and it specifies what perils (such as fire, lightening, flood, etc.) your home and belongings are insured against. The following are descriptions of the various insurance forms available for homeowners, renters and condominium owners. Not all insurers use these exact terms to describe their home insurance forms; however, the coverage provided will be similar. Home Insurance The five homeowners package forms offered to owners of single­family owner occupied homes are HO­1, HO­2, HO­3 with HO­15 and HO­8. These policy forms insure your home and belongings against at least 11 named perils. The more perils your policy covers, the more you will pay for the policy. Please email the Nevada Department of Insurance to receive these forms.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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