Your home is most likely your biggest and most valuable asset, and you should have California homeowners insurance to cover any physical damage to your home and any liability you may incur as the owner of that home.
If you have a mortgage on your house in the state of California, or for that matter, in any state, your lender will require you to purchase and maintain homeowners insurance on that home. Even if you have completely paid off the mortgage and own the house outright it is still very prudent to have a California homeowners insurance policy.
In order to qualify for a mortgage every lender will require you to have an insurance policy that will provide adequate protection against any damage or destruction to the property that they are financing. A California homeowners policy should cover all hazards as well as any liability that may occur on the property.
Mortgage companies differ in their requirements over the specific amounts of coverage you must carry, but, for the most part, they want you to carry replacement value and not actual cash value coverage. Replacement value protects the lender in the event that your home needs to be repaired or rebuilt due to a covered hazard. It pays the full cost and not the depreciated cost of the materials needed for repairs or reconstruction. Actual cash value only pays up to the limit of the policy which can be below the current market price for the materials and labor needed to actually restore the home to the same condition as it was in before the damage occurred.
Most homeowners policies in California also cover liability which protects you as the homeowner in the event someone gets injured on your property and sues. While this type of insurance is not mandatory, every homeowner that cares about protecting their house should carry personal liability coverage.
There are all different levels of insurance, from the minimum required by Texas State law to absolutely the best coverage that will protect you against just about any possible contingency. The recommended insurance coverage for different types of insurance usually falls somewhere in the middle. Listed below are some good levels of insurance coverage that are suitable for most people.
The basic minimum coverage by state law is 30/60/25, which translates into $30,000 in liability coverage for physical injury you caused in an accident to one person or $60,000 for all occupants and $25,000 for property damage that was your fault. A more appropriate amount would be 100/300/50 because if you are in a serious accident, the damages could far exceed the minimum coverage amounts and you may be held personally liable for the difference.
Your home is probably your most valuable asset. It is prudent to get as complete coverage as possible, which is normally a HO-C policy. The HO-C is the most comprehensive of the standard homeowners policies and protects against most losses with full replacement value coverage. That is important, because it will allow you to get a brand new mattress equal to the cost of an equivalent mattress that might be 10 years old and that has only a fraction of the cash value of a new mattress. The HO-C policy costs a little more but covers just about everything except those specifically excluded in the policy.
Term life is a much better value for your dollar than whole life coverage. Term life is strictly insurance coverage, while whole life has a savings component to it that does not warrant the much higher cost than term. Recommended coverage would be about 10 times your annual income.
Comparing the different home and auto insurance plans available is the best way to match yourself up with the policy that’s right for you. But sometimes, language can get in the way of helping you arrive at a perfectly sound decision—and what might sound good on paper today could be revealed as a horrible choice if you actually use your insurance. One of the most important terms you’ll need to be familiar with when shopping for car and homeowner insurance quotes is “replacement cost.”
What Does Replacement Cost Mean?
Essentially, replacement cost determines how your insurance company will reimburse you if your home or your vehicle are damaged beyond any reasonable ability to repair them. This is what happens when a car or a home is “totaled” and the insurance company decides it would be cheaper to offer you money for replacement instead of repair. If your insurance policy offers replacement cost over actual cash value, you’re in good shape. The actual cash value method figures in depreciation, whereas replacement cost doesn’t.
Premium Price Differences
Needless to say, the insurance companies aren’t stupid—by offering you a policy that guarantees they’ll pay you for the full value of what it takes to replace your car or home, they know they’re putting themselves in a position to pay out substantially more than they would by offering actual cash value. They make up for this difference by charging more for replacement value coverage, and in some cases you can only get actual cash value coverage. Keep this front and center to all of your decisions when getting homeowner insurance quotes. If you own a lot of expensive items, choosing the insurer that offers you replacement value is the only smart option.
If you’re about to buy your first home, you’re also probably about to get your first homeowner insurance policy. In fact, your mortgage broker will probably require you to get one so they know their investment is protected. Just like with every other form of insurance, it’s a smart idea to get some homeowner insurance quotes before you make your choice of insurance carrier.
When you compare home insurance quotes, you’ll notice a difference between the various insurance companies. In order to decide which of the homeowner insurance quotes is most appropriate for you, it’s helpful to have an overview of what basic homeowner insurance quotes coverage includes.
The most common form is called HO-2. This is a broad homeowners policy that covers your house and its contents against sixteen perils including fire, lightning, hail or windstorms, vehicle or aircraft damage, smoke, vandalism, theft, falling objects, electric damage etc. Homeowner insurance quotes can include coverage for more perils, liability coverage, or special coverage for older homes. One of the most important things to understand about homeowner insurance quotes is that they should reflect the costs of replacing your home after damage—not the cash value. This way, if your home is completely destroyed in a fire or natural disaster, the costs of rebuilding are covered.
Another important thing to know is that basic homeowner insurance quotes usually give the cash value coverage of the contents of your home, which might not be the best option in the event that you have to replace any items. Remember to request homeowner insurance quotes that cover the replacement costs of your possessions so you’ll have resources to rebuild your life in the event of damages.