Coverage
Homeowners insurance is generally available in different levels of coverage:
- Actual Cash Value pays to replace your home or possessions minus a deduction for depreciation. So your sofa that was purchased for $300 in 1995 might not be worth much after depreciation.
- Replacement Cost coverage pays to replace your sofa with a new similar sofa, so your sofa that was purchased in 1995 for $300 might be covered for $450 now. Of course, replacement cost coverage costs more.
Increasing your deductible might save you a bit on your premium. Say that your current coverage includes a $250 deductible. If you increase that deductible to $1,000, you might save 20 to 30 percent on your premiums.
Pay close attention to your policies limits. During the application process, your insurance company will determine a replacement value and insured amount. Most companies are honest with this, but some companies may use invalid figures. Try to avoid purchasing either too much or too little insurance. Remember that you're dealing with construction costs which can vary greatly, but there's no sense in insuring your home for more than similar houses sell for. On the other hand, if you don't insure your home for enough, you'll only receive the insured amount.