It’s not uncommon for first-time homebuyers, in a rush to meet their closing date, purchase a home insurance policy without reading the fine print. And an unfortunate few find out the hard way that they do not have the coverage they believed they had. Sometimes it takes a natural disaster like a tornado to teach them that although they are covered for damage resulting from the wind, they will receive nothing for flood damage since they do not have flood insurance. In other instances, they find out they are covered, but the coverage is not sufficient to pay for the cost of repairing the damage. 

While it is not possible to travel back in time to change their decision, they can make a better choice when it’s time to renew their policy. In the first instance, the answer is clearcut. They need to buy flood insurance. The second calls for some research and a bit of number crunching. Possible options are to purchase a

•  Replacement cost home insurance policy
•  Cash value home insurance policy.

In either case, their aim should be to make sure the new policy will provide a payout sufficient to cover or come near to covering, the cost of repairing or rebuilding a house here in the West Bloomfield, MI area.

Actual Cash Value Home Insurance?

This type of home insurance is cheaper but it takes into account the amount the home and its contents has depreciated in value since the date the policy goes into effect, before determining the amount of the payout. For this reason, it is also known as market rate insurance. This will especially impact the money they will get for household items like furniture.  The bottom line here is if the cost of construction and repair combined with replacement costs of household goods amounts to more than the policy’s value,  the homeowner will have to pay the balance of the costs out-of-pocket, and this may involve taking out a home equity or other type of loan.

Replacement Cost Home Insurance?

This type of policy will pay claims based on the actual cost of repairing, rebuilding, and replacing at the time the house sustains the damage. Many of our Agency Advantage Insurance clients who have switched to Replacement Cost Home insurance policies report that, although it is a bit more expensive than cash value home insurance,  it covered more of the repair or replacement costs than the cash value did.

Homeowners who live in West Bloomfield, MI, or any other area in the Metro Detroit area can always visit  Agency Advantage Insurance for a personalized comparison of these two types of insurance so they can make an informed decision.