When owning a home it is important to have the right coverage in case of an emergency. Having a property insurance policy provides protection against most risks to property. Owning a strong property insurance policy is pivotal to owning a home. Without a policy in place, a natural disaster or some other emergency could wipe out the home or property and leave an individual with nothing. In a time of economic hardship, having a property insurance policy is a necessity and without, times could only get harder in the event of an emergency.
Property is insured in two main ways. There are open perils and named perils. Open perils cover all of the causes of loss that are not specifically excluded in the policy. What is and what is not excluded in the policy depends on the type of policy that is purchased, but one can rest assured that if the event is listed in the policy, there will be some type of monetary supplement provided for the loss. Common exclusions from open peril policies include damage that results from earthquakes, floods, nuclear incidents, acts of terrorism and war. For these types of perils, named perils, a specific insurance policy must be taken out to cover this specific event. Without these specialized forms of insurance, the property owner will be subject to pay of the resulting costs alone.
There are three types of insurance coverage for property. Choosing a policy type depends on how much the individual is willing to pay for the coverage, but in turn how much coverage they are looking to receive for their money. The first type of coverage is replacement coverage. This type of insurance pays the cost of replacing property regardless of whether the property has depreciated or appreciated over the years. The premium that must be paid for this type of insurance varies and depends on replacement cost values, not actual cash value. Another type of insurance is actual cash value coverage. This provides payment for replacement cost minus the cost of depreciation. The last type of property insurance one can purchase is extended replacement cost. This will pay over the coverage limit if the cost for construction has increased, but will typically not exceed 25% of the limit. The limit is established when the insurance policy is purchased, and can be defined as the maximum amount the insurance company will pay out in case of the property loss. The limit rate will fluctuate depending on the depreciation and appreciation of the policyholder