WEDNESDAY, MAY 24, 2023
Protecting your home can be costly. Homeowners unsure about expensive premiums may want to consider a more affordable cash-value policy.
How a Cash-Value Policy Works 
All homeowner policies routinely cover household contents, but how these contents are covered varies greatly depending on the type of insurance. A cash-value homeowners policy means that when you file a claim, your lost, stolen or damaged items will be paid out at a depreciated value.
A replacement-cost policy means you pay the cost of a brand item, similar to the one that was stolen or damaged. You would get the full amount back in the event of a loss, but at a cost of higher monthly premiums. Replacement-cost coverage can be affordable.
A cash-value policy may be the better option if you are on a budget. Experts estimate that choosing replacement-cost coverage over a cash-value policy can cost up to 15% more each month in premiums. For many people, cash-value coverage is the affordable solution.
Cash-value Policy Considerations
To better understand the type of homeowners policy you need, carefully review your home and possessions and make a list of your home’s contents.
All homeowner policies cover household contents to some extent, but you exactly how much, you won’t know until you identify everything. Don’t wait until a catastrophic loss to realize you didn’t adequately assess your insurance needs.
These tips will help you analyze your coverage needs.
Inventory 101 for Homeowners:
- Create an itemized list of all household furnishings, equipment and any other personal possessions.
- Identify each item. Include brand, serial/identification number and detailed description, including color, size, style, features and any unique characteristics.
- Include the date the items were purchased or acquired and include the purchase price, if possible.
- Keep your inventory list updated, ensuring new contents make it on the list. Keep multiple copies of your list. Store at least one in some location other than your home.
Do Your Research
When you purchase a home, consider not only the cost of the house but the amount you will pay for insurance. Don’t forget to consider coverages not included in a standard policy, such as flood and earthquake damage.
Review the Comprehensive Loss Underwriting Exchange (CLUE) report of your house to see what problems your house may have. Consider a cash-value policy if coverage will cost more than you expected.
What Affects Home Insurance Prices?
- Type of Construction: Certain building materials make can make a house less disaster-prone than others.
- Age of House: Newer homes may qualify for discounts.
- Disaster Resources: The proximity of help and disaster relief resources to your home.
Disclaimer: This blog is provided for informational purposes only. The information provided herein is not intended to be exhaustive, nor should it be construed as advice regarding coverage. Eligibility for coverage is not guaranteed and all coverages are limited to the terms and conditions contained in the applicable policy.
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