The Difference Between 3 Common Coverage Options With Homeowners Insurance
Posted on: 7 February 2018
When you own a home, you need home insurance; however, buying the right policy can be confusing to some people. One confusing part of home insurance is choosing the right type of coverage option for your home. There are three different types of coverage options you can typically choose from, and here is some information to help you understand what these are and how they are different from the others.
Cash value
The first option you could choose is cash value coverage, and this is likely going to be the cheapest option you could choose. However, it offers the least amount of coverage. With this option, the insurance company calculates the value they pay you for your house based on what its depreciated value is. In other words, if you lose your entire house to a fire, you probably would not receive an insurance check large enough to rebuild the house. You would only receive an amount for the depreciated amount.
Replacement cost
The second option is often the most common method of all and is called replacement cost coverage. With this option, you have coverage for your home for the total amount it would cost to replace the home. If you lost your entire home, you would have enough coverage to rebuild the same home.
Extended replacement cost
The final option, which is typically considered the best option, is called extended replacement cost coverage. This option is often called guaranteed coverage as well, and it offers the most coverage of all three options. Because of this, it will also typically cost the most to purchase. The benefit of having extended replacement cost coverage is that you will definitely receive enough money from the policy to rebuild your entire home, plus you could even receive extra from it. If you want to make sure you have plenty of coverage on your home, this is the option you would probably want to choose.
Keep in mind that every policy, no matter what type of coverage option it offers, has a deductible. The deductible is the dollar amount of money you would have to pay before you could receive money from the insurance company for the rest of the costs of damages. You can choose almost any amount for the deductible, but most people choose anywhere from $500 to $2,000.
If you would like a quote for home insurance with any of these methods, contact one today and ask for a free quote.
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