Finding the best homeowners insurance company for you starts with making sure you’re shopping for the right coverage. A standard policy covers your house and other structures, but the amount of coverage you need depends on how much it would cost to rebuild your home.
Homeowners insurance policies generally cover destruction and damage to a residence, the loss or theft of possessions, and personal liability for harm to others.
Three basic levels of coverage exist: actual cash value, replacement cost, and extended replacement cost. Actual cash value covers the cost of your house and items after factoring in depreciation. Replacement cost fixes or replaces your home and possessions without depreciation factored in. Extended replacement cost gives you an additional buffer of 25%, 50%, or 100% coverage on the primary structure.
Policy rates are largely determined by the insurer’s risk that you’ll file a claim. They look at your prior claims history, the condition of the home, and the location and terrain of your property.
When shopping for a policy, get quotes from multiple companies, and check with any insurer you already work with.
What a Homeowner’s Policy Provides
Damage to the Interior and Exterior of Your House
In you suffer damage from a fire, lightning, burst water pipe or other covered disasters, your insurer will compensate you so your house can be repaired or rebuilt. Destruction from floods, earthquakes, and poor maintenance is generally not covered and you will need a separate policy to insure for them.
Clothing, furniture, appliances, and most of the other contents of your home are covered if they’re destroyed by a covered incident. Your policy should even cover your belongings off premises, so you could file a claim if your belongings were stolen almost anywhere in the world. There may be a limit on the amount your insurer will reimburse you, however.
If you own high priced or unique items it’s worth looking into adding a rider to provide coverage. Most policies have limited standard limits for things jewelry, art, musical instruments, antiques, and other items that may need appraisals.
Loss of use or additional living expenses
This pays for temporary housing while your home is being rebuilt or repaired. It can take several years to rebuild a home after a wildfire. Make sure you have enough coverage here to rent for 1-2 years in your area at a minimum.
Pays for updates to undamaged portions of your home if your city says you need to bring the home up to current code before they’ll issue permits to rebuild. This can be very pricey when you consider interior sprinklers are required for brand new homes in California.
Owner of Paul Nelson Insurance, and resident of Santa Cruz and Monterey counties for 30 years.