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On the other hand, if your $50,000 home is insured for $30,000 and you suffer a $25,000 loss, your company would pay for only part of the loss and you would have to pay for the balance yourself. It may therefore be advisable to insure your home at a minimum of 80% of its replacement cost. Check with your agent or insurance company to see what is required. You may wish to insure at 100% of replacement cost so you will have sufficient coverage in the event of 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 20 year warranty and is 17 years old, there would be 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 a replacement cost. The premium will be slightly higher for this coverage; however, you may want to consider the 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, improvements, and yearly inflation all increase the replacement cost of your home, while the actual cash value of the home may decrease over time.
Check with your agent or insurance company at least once a year to make sure your policy provides adequate coverage.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified home insurance lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local home insurance attorney to discuss your specific legal situation.