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Home Insurance
How does your policy pay out when you have to make a claim?
Your home insurance policy will provide coverage in the event of loss or damage to property. There are other conditions that apply as well for which you can claim compensation such as a lawsuit from people who stayed in your property but sustained injuries or an accident while staying. However, every policy is different from the other and each insurance company has something unique to offer to their clients.
In short a home insurance policy protects you for damages occurring to the home structure, loss of personal belongings and personal liability. This means that if any of these events were to occur you could make a claim against the policy.
The compensation provided for any of the above-mentioned events can be in the following manner:
Payment by way of actual cash – This is where you receive cash compensation for losses or damages that occur to your personal property, your personal belongings or personal liabilities. In the case of compensation for home structure damage or damage to personal belongings the amount given is the cost of replacement at the time of loss minus depreciation.
Extended replacement cost – This enables you to get extra compensation in the event of loss or damage to property. The extra is denoted by the term ‘cap’ in the insurance policy. Let’s take an example here. You pay $200,000 for dwelling coverage, which has a $250,000 cap. In the event of a fire, if the estimated cost of rebuilding / building is more than $ 200000, then you can receive compensation for up to $250,000.
Guaranteed Replacement– In this coverage type, you don’t have to bother with issues like a no cap or maximum pay-out amount. It covers for the rise in value of building material as time passes. For example, if your home was originally worth $150,000 and you make changes and renovations to it, whereby the home value increases to $250,000 then this coverage enables you to get a compensation for up to $ 250,000 in the event of an accident like fire. This means you can get compensation for the market value of your home at the time of loss because of this coverage.
Knowing how exactly you will be compensated makes you aware on how, and how much you can claim against your home insurance policy in the event of a loss. If you are unaware about this then you will not know how to claim your exact dues at the time of loss, which is quite unfair given the fact that you have paid for coverage.
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