Many find homeowner’s insurance to be a prudent investment when purchasing a home. It is the kind of thing that can save you a fortune should the worst happen. It is also something that many people do not understand very well.
So how does homeowner’s insurance work? What does homeowner’s insurance cover? These questions are important for a homeowner to understand when buying a policy, but policies can vary wildly. The details of your policy depend on how much you’re paying and what kind of policy you purchase.
Understanding Home Owner’s Insurance
Some policies, for example, are only going to pay out what they call ‘actual cash value’. Let us suppose that an extreme hail storm damaged your roof, and now it needs repairs. If your policy is an ‘actual cash value’ policy, they would pay you the ‘actual’ value of the roof at the time that it became damaged. So, if your roof was halfway through its lifespan before it was due for replacing, the insurance company will determine the depreciation of the roof over that period of time. They will then deduct it from the value of the roof in its pristine condition. They will pay you that depreciated value, and you’re on the hook for the rest of the costs.
Other policies are ‘replacement policies’ or ‘replacement cost policies’. When you have a policy that is a replacement cost policy, how old your roof is no longer matters. It could be one year away from needing to be re-shingled and having general upkeep work done, and you will still get the costs of replacement paid. Typically, your insurance company will pay that money up front, leaving you to only cover the cost of the deductible.
Now, here’s where it can get a bit more complicated. In some cases, even if you have a replacement policy, they will hold the depreciation in reserve. They will hold that amount in reserve the roof repair is complete, and then they will release the money to cover the depreciation to you. You’re still only paying the deductible, in the end. However, if you don’t complete the repair or replacement in a certain period of time, usually between six months to two years (check your policy for more information), then the depreciation value goes back to the insurance company, leaving you paying more at your own expense than you would have otherwise needed to.
Be Leery of Partial Repairs
Further, in some cases, the insurance company will attempt to minimize their costs by covering only the repair of the damage (in this case, the roof), while not covering the cost of various things that you would usually replace in the course of replacing a roof. For example, they will cover the cost of the replacement of the roof, but they won’t pay for the replacement of step flashing or drip edging, both things that you would usually replace with the roof. If you want those replaced, you will need to pay out of pocket, or you can leave them as-is.
The important lesson to learn about insurance is that you need to understand your policy and what it covers. You also must be sure to complete repairs in a timely manner. If you’re unsure about your ability to deal with your insurance company, or you are unsure what the policy means to you, it is in your best interest to work with a home improvement or home repair company that has a long history of working on your behalf with insurance companies to limit your out of pocket expenses.
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Reach out to National Home Improvement today to discuss your repairs today.
