Question:

What does homeowners insurance cover?

Answer:

Homeowners insurance cover for any man-made and natural calamities, such as fire, storms, hurricanes. Damage and loss of property, and possessions such as electric appliances, clothing, and furniture can also be covered to some extent. Liability coverage will insure you if someone gets injured in your home - if they fall on wet floor, or your dog bites them.

A loss of use coverage will cover your expenses if your house has been damaged and is currently impossible to inhabit.

However, the most important thing to insure your home against is the home itself. It is recommended that you insure your home with at least a replacement cost homeowners insurance coverage.

Other types of homeowners insurance coverage are Actual Cash Value (ACV) and Extended Replacement cost.

The Actual Cash Value comes out the cheapest option but consider this - due to fire your TV set, carpeting and expensive furniture have been destroyed. With an ACV homeowners insurance you will get as much cash as your damaged items cost at the moment of loss. That is, you purchased your TV and furniture set for $3,500 two years ago, but they have depreciated in value since and at the time of the fire their actual cash value is estimated to have been not more than $1,300. Can you replace them with that money? No. Therefore, you should simply get replacement cost coverage for your house in the least.

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