Are you covered?
Homeowners, apartment owners and renters can buy many different kinds of property and casualty insurance.
In terms of risks covered, there are two subcategories: named peril and all peril. Named-peril policies specify the risks covered and exclude everything else. All-peril policies specify the risks not covered but include everything else. Risks are defined as anything that causes economic loss.
The most basic policy (called an HO-1) provides protection against losses caused by fire, lightning, windstorm, hail, explosion, riot, smoke, vandalism, theft and damage caused by aircraft, vehicles and even volcanic eruptions. It is the least common type of policy.
Read More... A broader policy, an HO-2, usually covers other named perils like falling objects and the weight of ice, snow or sleet; leaks from plumbing, heating, air-conditioning and fire-sprinkler systems; cracking, bursting, burning or freezing of such systems; and sudden and accidental damage to fixtures or appliances caused by an electrical discharge.
An all-peril policy, HO-3 (the most common) covers all risks except those specifically excluded. Typically, an HO-3 policy excludes coverage for damage caused by flood, earthquake, war, nuclear accident, landslide, mudslide and sinkholes. Some insurers now exclude or limit coverage for mold. Flood insurance must be bought separately.
In terms of reimbursement for loss, two basic types are available -- actual cash value and replacement cost coverage.
The least expensive is actual cash value coverage, in which a home is insured for only the face amount of the policy, no matter how much it might actually cost to rebuild it. The contents are insured for their actual cash value up to a cap that is typically a percentage of the face value of the policy. Such a policy reimburses an owner for only an item's depreciated value.
With replacement cost coverage, different forms are offered. Most replacement cost policies offer an additional 25% of the replacement cost to insure that cost increases are covered. For contents coverage, most replacement cost policies do not in practice replace the contents item by item. The replacement cost for contents is a percentage of the total cost to replace the home, and is usually more than enough to cover everything. Most insurance carriers have caps, which vary by company, on the maximum reimbursement. Certain more expensive items might need a rider added to the policy to insure they are covered completely.
In addition, different carriers often define "replacement'' differently. There is true replacement cost coverage -- which pays to replace an item with its equal -- and functional replacement cost coverage, which replaces it with a functional equivalent. With true replacement cost coverage, a hand-hewed oak beam would be replaced with a hand-hewed oak beam. With functional coverage, it would be replaced with a beam that would perform the same function.
The very best coverage, experts say, provides true replacement of the structure regardless of the cost. Such policies generally cost about 25 percent more than less-comprehensive policies, but are usually worth the extra premium to get your life back together.
ABOUT FAMILY INSURANCE
Phone # (405) 329-9780
Fax # (405) 823-6917
http://www.gotomypolicy.com
paul@familyinsu.com