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Replacement Cost Coverage
(three types): 1.
Replacement Cost Coverage provides a dollar amount to repair
damaged property or to replace it with new property of like
kind and quality, without deducting for depreciation (that is, the
decrease in value due to age, obsolescence, wear and tear and other
factors.)
Replacement cost policies cover the full
cost of replacing the damage to your home up to your policy’s limits. For
example, a replacement cost policy with a $100,000 coverage limit on the
dwelling would cover the cost of replacing a $100,000 house, regardless of
whether the house rose or fell in value.
2.
Extended (or Modified) Replacement Cost coverage will provide a
certain percentage over the policy limit to rebuild your home - 20 percent
or more, depending on the insurer -- so if building costs go up
unexpectedly, you will have extra funds to cover the bill. These types of
policies are not offered by all insurers.
3. Guaranteed Replacement Cost
policies are rare. This policy pays out whatever it costs to rebuild your
home as it was before the disaster--well over the policy limit if
necessary.
Actual Cash Value Coverage:
Actual Case Value Coverage pays the fair
market value of the dwelling up to an identified policy limit. Fair
market value is determined by way of an appraisal based on comparisons to
other similarly situated structures, less the value of the land. Coverage
for actual value policies are limited to a specific amount, regardless of
whether the value of the house increases. For example, a $70,000 actual cash
value policy would cover only $70,000 in damages, even if the value of the
house rises to $100,000. This type of coverage could end up costing the
insured out-of-pocket more than they expected. Therefore, increases in
limits to keep up with inflation are more important with these types of
policies.
Other Coverage's:
Building Code Upgrade
(BCU) coverage provides monies to pay for any building code upgrades that
may be required during the repair / rebuilding process. Policies may or may
not include BCU coverage. Some companies offer such coverage in the form of
an add-on or "rider." If the insured does not have this coverage, it will be
an out-of-pocket expense.
Structures other than the dwelling
coverage can include other structures at the residence premises not attached
to the dwelling, sidewalks, driveways, permanently installed yard fixtures,
and private or decorative fences. Typical limits on coverage are 10 percent
of the value of the dwelling.
Personal Property (contents)
coverage protects against damage to or loss of
personal property (contents). Typical limits on coverage are 50 percent of
the value of the dwelling. These limits can be reached easily under certain
circumstances. Policyholders can purchase Inland Marine policies (riders)
that cover specified items such as artwork and jewelry.
Loss of Use
coverage covers expenses beyond replacing property if a home cannot be lived
in as a result of fire. Typically the coverage pays for the living expenses
incurred to maintain normal lifestyle.
Additional living expense
(ALE) method is most common way to calculate loss of use. This method
permits you to maintain your normal standard of living by covering the
increased living expenses incurred as a result of the fire. Typical items
covered by ALE coverage include extra food costs, increased housing costs,
furniture rental, relocation and storage costs, telephone installation,
extra transportation costs to and from school or work.
Renters Insurance:
This insurance covers the loss of personal
property and loss of use of the rental unit due to fire and may include
liability and medical payments coverage.
Condo Insurance:
This insurance covers personal property and
improvements to the individual condominium. Loss of use is generally limited
to 40 percent of the value of the contents.
Mobile Homes:
This coverage is considered residential if the
mobile home is established as a permanent residence. A few companies offer
this coverage.
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