Homeowners Insurance in California
If you own a home in California, buying a homeowners insurance policy is not mandatory, though it is more than just a good idea to do so for numerous reasons. First of all, regardless of region, most California homes face major damage risks. These risks include include earthquake, flood, theft, and other hazards a given area may pose. An appropriate homeowners insurance policy will prevent you from suffering major financial loss in the event of any of these. Secondly, if you are buying a home, your mortgage lender most likely require you to purchase an insurance policy for your home before they offer you a loan. Your ideal policy should be a unique blend of coverage types based on risks your home faces as well as the kind of policies potential insurers are offering you. The following policy types are all available in California, though not all insurers are obligated to offer all of them.
Replacement cost vs. cash value coverage
These are the two primary types of insurance policies available in California. Each type has its own advantages and disadvantages, so examine your own insurance needs to determine which is most suitable for you.
Replacement cost policies. A basic replacement cost policy will cover the replacement costs resulting from damage to a certain preset dollar limit. This amount stays the same regardless of fluctuations in your home's value. An extended replacement cost policy will cover the preset amount as well as 20% or more over the limit to adjust for increased building costs (not all insurers offer this type of policy). Guaranteed replacement cost policies -- however rare - - will go beyond your policy limit in order to cover the costs of rebuilding your home.
Cash value. Another type of coverage with preset values, this type of policy insures you a certain amount based on a value assessment that considers the value of similar structures. This appraisal does not take into account the value of the land your home sits on, nor will the amount paid out on a claim increase if your home value soars between the time you buy your policy and the time you make a claim. This is why it is a good idea for holders of this type of policy to periodically adjust their cash value coverage amount in accordance with inflation and rises in home value.
Other types of coverage
If you want more than just the basics, you can choose to purchase additional coverage for your home. You can extend your homeowners insurance policy to cover structures on your property beyond your house, including your driveway, garage, and fence. You may find that some of the following coverage would enhance your overall policy.
Personal property. This ensures replacement for the contents of your house in the event that you need to make a claim. If you purchase this coverage be sure to take an accurate inventory of the contents of your house as well as their value.
Building code upgrades. This coverage pays for any updates to a structure to make it comply with building code that will occur during the repair or rebuilding process. Some policies contain this while others may require that you pay separately for it. Otherwise you will have to pay for the upgrades yourself.
Loss of use. If a fire or other incident renders your home unlivable, this coverage will pay for your living expenses to a reasonable degree. This includes food, housing, relocation, transportation and utility costs, among others.
Shopping smart in California
There are steps you can take to ensure you are getting the most you can out of your homeowners insurance policy. A home inventory is key. For the sake of your loss of use policy it is a good idea to keep track of your spending so that you can accurately gage your living expenses. As you are shopping around, take a look at the informative articles the California Department of Insurance has published on its web site to find out more about coverage on earthquake, mold damage, and other types of policies.