Home insurance is a cost not many of us like to pay but it is necessary to protect one of our biggest possessions. Just watch the news and you will see all over the country homes are affected by disaster almost daily. With that in mind it helps make it not such a big deal to pay our bill once a year or even monthly. Most home loans allow you to escrow a small amount each month and then pay your bill when it is due. Escrow means to set aside money in an account which is managed by a 3rd party (usually a bank). That bank will then pay your insurance bill each year when it is due. This helps take away the challenge of setting money aside each month.
The cost you insure your home at can either be its "Actual Cash Value" or at its "Replacement Cost Value." Today I visited with Mike Nordby a close friend who is an agent for his own company Modern Insurance Services. He works all over the region and explained the importance of understanding the two different ways one could insure their home. If you insure your home at Actual Cash Value you may end up saving some money monthly but if a disaster happens you will more than likely need to use some cash out of your own pocket to rebuild your home exactly how it was because you will only get the amount of the value of the home. For example there are many more additional costs that just building your home after it were to say burn down. The removal of debris is one of the biggest costs and there would more than likely not be enough money left for that if you only insured the property at Actual Cash Value.
Replacement Cost Value is exactly what it reads. You will get your home rebuilt exactly like it was and you will not have any extra costs out of your pocket besides a deductible of course. Comparing the two ways to have homeowners insurance may be best illustrated by the following example. If you had built a home in 1980 and it cost you $80,000 to build that same home would probably cost you over $160,000 today. If you were insured for cash value you would have a lot of extra costs to rebuild the same home. Always check with your insurance agent to see what insurance option works best for you.
The cost you insure your home at can either be its "Actual Cash Value" or at its "Replacement Cost Value." Today I visited with Mike Nordby a close friend who is an agent for his own company Modern Insurance Services. He works all over the region and explained the importance of understanding the two different ways one could insure their home. If you insure your home at Actual Cash Value you may end up saving some money monthly but if a disaster happens you will more than likely need to use some cash out of your own pocket to rebuild your home exactly how it was because you will only get the amount of the value of the home. For example there are many more additional costs that just building your home after it were to say burn down. The removal of debris is one of the biggest costs and there would more than likely not be enough money left for that if you only insured the property at Actual Cash Value.
Replacement Cost Value is exactly what it reads. You will get your home rebuilt exactly like it was and you will not have any extra costs out of your pocket besides a deductible of course. Comparing the two ways to have homeowners insurance may be best illustrated by the following example. If you had built a home in 1980 and it cost you $80,000 to build that same home would probably cost you over $160,000 today. If you were insured for cash value you would have a lot of extra costs to rebuild the same home. Always check with your insurance agent to see what insurance option works best for you.
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