Homeowners Insurance Coverages You Need

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Different Types of Homeowners Coverage 

All insurance is definitely not created equal. The least costly homeowners insurance will likely give you the least amount of coverage, and vice versa.

In the U.S. there are several forms of homeowners insurance that have become standardized in the industry; they are designated HO-1 through HO-8 and offer various levels of protection depending on the needs of the homeowner and the type of residence being covered.

There are essentially three levels of coverage.

Actual cash value 

Actual cash value covers the cost of the house plus the value of your belongings after deducting depreciation(i.e., how much the items are currently worth, not how much you paid for them).

Replacement cost 

Replacement value policies cover the actual cash value of your home and possessions without the deduction for depreciation, so you would be able to repair or rebuild your home up to the original value.

Guaranteed (or extended) replacement cost/value 

The most comprehensive, this inflation-buffer policy pays for whatever it costs to repair or rebuild your home—even if it's more than your policy limit. Certain insurers offer an extended replacement, meaning it offers more coverage than you purchased, but there is a ceiling; typically, it is 20% to 25% higher than the limit.

Some advisors feel all homeowners should buy guaranteed replacement value policies because you don't need just enough insurance to cover the value of your home, you need enough insurance to rebuild your home, preferably at current prices (which probably will have risen since you purchased or built). “Often shoppers make the mistake of insuring [a house just] enough to cover the mortgage, but that usually equates to 90% of your home's value," says Adam Johnson2 , data analyst for policy comparison site QuoteWizard.com. "Due to a fluctuating market, it's always a good idea to get coverage for more than your home is worth." Guaranteed replacement value policies will absorb the increased replacement cost and provide the homeowner with a cushion if construction prices increase. 

Sewer backup describes what happens when water comes up or is pushed into your home through the pipes from sewer or drainage systems. It is a very unpleasant type of water damage because it often involves dirty water from the sewers that will not only destroy your personal property but can also impact your health because it's so unsanitary. 

Most people don't know a lot about sewer backup coverage if they've never had to make a claim. Sewer backup can cause thousands of dollars in damage. The Civil Engineering Research Foundation indicates that the rate of sewer backup incidents is increasing at a rate of 3 percent a year, so this is one coverage you don't want to do without. Let’s take a look at some of the causes of sewer backup.

Blockage of a city sanitary main: If the city main gets blocked, it may cause water to back up into your home through your pipes. 

Aging sewer systems that require updates or repair. 

Tree roots: When you have older pipes sewer lines and water entry pipes, tree roots can find their way into the pipes and cause blockages. You can check for this problem on your own lines by having a plumber check your pipelines with a camera and do some basic maintenace on your home. 

City-related pipeline issues like combined pipelines or problems in the sanitary main: When the system you are using combines the sewage and stormwater into one pipeline instead of having a separate pipeline for each, these are combined pipelines. The system can get overwhelmed in a storm and the water can back up into your home. 

Overflow or back-up of the drainage systems in your home. If your gutter systems or rainwater pipes are blocked or overwhelmed by debris or sudden water flow it may cause a back-up into your home. 

Sewer backup is not automatically included in most standard homeowner policies. You must add it to your policy by endorsement to make sure you're adequately protected. 

Sewer backup coverage can be added to a policy for as little as $40 to $50 a year, according to national average. Contact your insurance company to find out the specific cost, but considering the aging sewer systems in many areas and the increased incidence of severe weather causing claims, it's worth finding out about. 

As always your friend and neighbor,

Matthew Glass