Whether your house is your home, a vacation cabin or a real estate investment, you need house insurance to protect you in case of losses such as fire, storm damage, broken water pipes, vandalism or something unusual like smoke damage from leaving a pot on the stove too long, or a fire close by in your neighborhood.
If you have a loan on your house or are applying for a loan you will be required by the bank or loan company to insure it in order to protect their investment. At one time the bank or loan company would require you to carry a policy that insured the full sales value of the home. The house itself might only be worth $250,000. but because of a location in a high end area and with a view, the sales value might be $450,000.
A law was drawn up in Washington so the mortgage company couldn’t demand that you be required to carry more insurance than the house is worth. At one time insurance companies required replacement cost. You now have the option to not have replacement cost insurance. There is a cash value insurance for the home itself that does not include any other amenities. This may satisfy the loan requirements.
When the policy does not include replacement cost, and the house is destroyed, people with low insurance may not be able to rebuild any form of home, but would still owe the full amount of their mortgage. Most companies recommend insurance equal to the replacement costs of the house. It is possible that the replacement cost is less than the value of the house, but generally it is more.
When looking at insuring a house, insurance companies have to consider a number of factors. First they look at the house and list all the amenities. Are the floors tile, wood or carpet. What is the grade of the tile or carpet? They look at the heating and cooling system. They look at the materials used to build the house. Is the siding T-111 or batten board? Is there a deck or a sunroom? They consider the appliances, whether there is a fireplace or wood stove. They add it all up and then get a cost replacement value depending on the area where you live. They will also look at your location.
Each area in the state of Washington varies in construction costs. Each house depending on the materials used to build it, will have a different replacement cost. The higher the quality of the building materials in the house, the more it will cost to replace them. Unless the house is brand new, the cost of building materials will probably have increased from the time that it was built. This can mean that the amount of insurance you need to carry can exceed the amount of your loan.
The insurance company will check on labor and permit costs for your area.
They will also get estimates on what it would cost to clear your lot after the home has been damaged beyond repair or what it would cost to clear an area such as a kitchen that has burned, before it can be rebuilt. This is added in to the cost of your insurance.
There are other factors to consider as well. If your house is in a flood zone
you may be required to carry flood insurance in addition to your regular house insurance. Some insurance companies in Washington will not insure a house that is within a certain distance from any body of water.
There are many factors to consider before deciding on an insurance company. You want to know they will be there for you when you need them and that they process their claims quickly. You want to know how you will be taken care of in the interim if your home is a complete loss or damaged to the point you can’t stay there. You need an advocate in your insurance agent, not just a company.
You will want to know how much coverage you will have on your contents such as furniture, appliances, sports equipment, jewelry, antiques, art work or other personal items. Few people realize what the replacement of their house contents would be when purchased new. Some of these things may require a different addition to your policy. They may require appraisals and photos.
Some companies will limit the amount they will pay for your jewelry. With one company there may be a $500. limit while another company may limit the value to $500 per item with a maximum total of $5000.. Limitations and exclusions vary from company to company and area to area.
Some insurance companies may exclude mold damage. Others may allow for it, but with specific language. It may only be covered in the event that it was caused by recent damage, such as a broken pipe where the contractor was unable to work on the area before the mold began or missed something that allowed the mold to grow. Rarely will lack of maintenance that caused the damage over a period of years due to neglect on the part of the homeowner be covered.
You will also need to carry liability insurance in the event someone is injured on your property. This also needs to be specific as to whether it only covers medical for the person or also protects you in the event of a lawsuit.
If the homeowner has failed to maintain the property and has for instance, neglected to repair a broken board on a step, the insurance company may not be required to cover the incident.
There is a lot to consider when choosing insurance for your house. It is important to have a list of questions for your insurance agent or broker to be sure you have the coverage you want and need.
