The Basics
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With respect to your dwelling, replacement cost is the actual dollar amount it would take to repair, rebuild, or replace your home.
This is not based on a tax appraisal or sales price — the cost of rebuilding your home could be more or less than what you paid for it or what it would sell for on the current market.
Instead, the specifics about your home (square footage, materials used in its construction), the current building code, and local construction costs are all used to calculate the replacement amount. If you make enhancements or additions to your home, you should notify your agent of the increase in value of your dwelling. Replacement Cost coverage for your dwelling is standard on our Centennial policies and is available as an upgrade on our Star policies.
With respect to your personal property, replacement cost coverage will pay you the actual dollar amount it would take to repair or replace the item, without any deduction taken for depreciation (loss of value). Replacement Cost coverage for your personal property is available as an upgrade on both our Centennial and Star products.
Actual cash value (ACV) is the replacement cost minus depreciation. Depreciation is the amount of value an item has lost due to its age, wear and tear, and other factors.
If your property is insured for actual cash value only, you will be paid this reduced amount in the event of a covered loss. Actual Cash Value coverage for your personal property is standard on both our Centennial and Star products but can be upgraded to Replacement Cost coverage for an additional premium.
You may be eligible for one or more of the property insurance discounts we offer. Please contact an agent for more information.
Generally, there are two methods of paying your insurance premiums. You may pay your premiums directly to your insurance carrier, or your mortgage company may pay them on your behalf.
If your property has a mortgage through a lender, the mortgage company usually sets up an "escrow account." Typically, the lender requires a specific amount of money to be kept in this account at all times. When you pay your monthly mortgage payment, part of the payment is placed into the escrow account to fund it. From this account, your lender will pay your property taxes and homeowner's insurance when they come due.
Note that homeowner's insurance is not to be confused with private mortgage insurance (PMI). Your lender may require you to purchase PMI if you do not make a down payment of at least 20% of the selling price of the property at the time of purchase. PMI protects your lender in the event you default on your loan. It does not provide any coverage for you or your property.
If you do not have a lender or if you do have a lender but choose not to pay via an escrow account, you can pay your homeowner's insurance premiums directly to your insurance carrier.
A standard homeowner's insurance policy provides separate coverages that are packaged together to provide a broad spectrum of financial protection in the event of a covered loss. In the State of Texas, there are two types of policies available to homeowners, All-Risk and Named Perils.
Named Perils policies are sometimes known as "Specified Perils" policies. This policy type only covers the causes of loss specifically named in the policy and offers narrower coverage than an all-risk policy. Our Star product is a Named Peril policy.
All-Risk policies are sometimes called "Comprehensive" or "Open Perils" policies. These policies offer the broadest protection and covers all causes of loss, unless the policy specifically excludes them. Our Centennial product is an All-Risk policy.
Standard exclusions include floods, earthquakes, and mold. If you live in a flood plain, there may be coverage available to you through the National Flood Insurance Program (NFIP) operated by the Federal Emergency Management Agency (FEMA). For more information on flood insurance, you may reach NFIP at (800) 427-4661 or online at www.floodsmart.gov.
Dwelling coverage insures the actual structure of your home. Depending upon the type of policy purchased, this will pay to either repair, rebuild, or replace your home.
It's critical that you correctly estimate the value of your home. This will help you make a determination of the amount of insurance you should purchase and avoid the heartache of being underinsured in your time of need.
You may have other structures on your homestead, such as a detached garage, shed, fence or other buildings. These items generally fall under the Other Structures portion of your policy, and coverage will be limited to a percentage of your dwelling valuation.
The Personal Property portion of your homeowner's policy insures the contents of the home, including furniture, clothing, art, and other personal belongings. There may also be limited coverage available for these items when traveling.
In the event of a covered loss, most policies will pay the actual cash value of the property up to a percentage of your dwelling valuation. Replacement cost coverage is an affordable upgrade available in most cases.
To determine how much personal property coverage you may need, it is recommended you take a written inventory and calculate the value of your belongings. Receipts, purchase information, serial numbers, and photographs will assist with any future claim you may have. You should store this data in a fireproof safe or at another location. Jewelry, furs, antiques, collectibles, and other high-value items have a limited amount of standard coverage. To ensure you have adequate coverage for these items, you should discuss adding a rider (endorsement) to your policy with your independent agent.
In the event you are displaced from your home because of a covered loss, there may be a limited amount of coverage available to you to assist with the cost of temporary housing, food, and possibly transportation.
If you would like to purchase more protection than a standard policy offers, you may be able to add additional coverage or change existing coverage via an endorsement to your policy. Your knowledgeable independent agent will be more than happy to assist you and answer any questions you may have.
Personal liability insurance may be available in a supporting policy. This coverage can protect you from having to personally pay for losses experienced by others due to your own negligence. It also provides for legal expenses in the event a lawsuit is brought against you.
Medical payment coverage is a no-fault insurance that will pay for a limited amount of medical bills arising out of a covered event. Injuries to the homeowner and members of the homeowner's household would not be covered, as Medical Payments only provides for injuries to individuals outside of the homeowner's household.
Many factors are used to determine the appropriate premium for a homeowner's policy.
The age and value of your property, the materials used in its construction, the size of the property, its fire vulnerability protection class and where your property is geographically located all come together to form the baseline of your rate calculation. Additional factors, such as claims history, insurance score, and the amount of coverage desired, also play a role in rate calculation.
Generally, a property's fire vulnerability protection class is based upon its location, the type of fire-fighting force it is serviced by, and its proximity to a fire hydrant or station. A property located in a rural area that either has no fire-fighting service, or is served by a volunteer force, is rated differently than a property located in a city that is serviced by career firefighters who are more equipped to respond to an emergency call.
Most insurance companies also use your personal insurance score in their rate calculations. Your claim history and current credit report information are used to determine your overall insurance score. Note that your insurance score is not the same as your credit score. Your credit score reflects your history of repaying debts and predicts your ability to repay future amounts you may borrow. Your insurance score, however, is an indicator of possible future claim activity.
Regular homeowners insurance policies don't cover damage from flood waters.
Give us a call to discuss the available options for your property.