If purchasing home insurance is on your list of things to do, you might feel slightly confused about what to look for in a policy. Buying a home insurance policy is not difficult, yet it can be confusing if you are unfamiliar with it. If you need a policy, you might have a few questions. Here are four common questions that people ask home insurance agents.
1. Do You Need Home Insurance for Legal Purposes?
The first question you might have is if the law requires having home insurance. There is no law that forces homeowners to purchase home insurance, yet lenders require it. If you have a loan, you must have homeowner's insurance. Additionally, having a policy protects you from lawsuits that might arise from issues that occur on your property. A home insurance plan offers liability protection for this purpose.
2. What Is the Difference Between Replacement Cost and Actual Cash Value?
The second question you might wonder about is the difference between replacement cost and actual cash value (ACV). These are valuation methods that insurance companies use when paying claims on losses. If you get a policy with replacement cost coverage, your insurance company reimburses you by determining how much it costs to replace the items you lost. With ACV, they reimburse you enough money to cover the actual value of the things you lost. Therefore, replacement cost coverage is the better option to have, yet it might cost more to have this valuation method on your plan.
3. How Do You Determine the Structural Coverage Amount to Use?
Many homeowners also wonder how to determine the amount of structural coverage to have on their policies. The best way is by adding up the amount of money it would cost to rebuild your house.
4. What Is a Rider?
Finally, you might wonder what a rider is and how it works. A rider is an extra type of coverage you can add to your plan for a specific peril or asset. When you add riders, you add coverage to your plan, but you pay for each one. Your home insurance agent can help you determine if you need any riders with your policy.
As you prepare to purchase home insurance, you can ask these questions and others. You can contact a home insurance agent to learn more about the answers to these questions and other questions you might have.