A major decision to make when purchasing insurance for your home concerns replacement cost value and actual cost value coverage. To best understand the difference, I would like to give an example from an auto policy. Your new car cost you $22,000 3 years ago. It is now worth $15,000. If you total the vehicle, your insurance company will pay you $15,000 or what is known as Actual Cash Value; they will not reimburse you for your original cost of $22,000 or your Replacement Cost Value. If your kitchen is ruined by a fire, a 10 year old fridge will be replaced with a new unit under Replacement Cost Value.
Another consideration that is very important to consider when your need for insurance arises is the deductible amount paid by you on covered perils. In the past, the insured retained part of the risk by choosing a $500.00 or a $1000.00 deductible for insurance against car theft, fire, and storm damage.
Many insurers have recently revised their wind and hail policy coverage deductibles. Some still offer the same deductible amount, regardless of other companies' changes. Some companies have gone to 1% deductible, while other companies have gone to a 2% deductible. What does that mean for you, the insured?
If the roof on your $175,000 home was partially destroyed by a storm, a 1% deductible would translate to $1750.00 for your portion of the bill, while a 2% deductible would mean $3500.00 for your part of the bill.
In closing, allow me to emphasize the importance of getting the correct coverage both in terms of dollar amount and deductible amount. A local insurer who can talk with you face to face and look at your property personally will have a wonderful opportunity to provide you, the insured, with sincere and personalized service.
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