Question

 1. Which two types of natural disasters are not normally covered in a homeowner's policy?

 2. Why might a mortgage lender require you to have home insurance?

 3. What is the difference between actual cash value and replacement value? Which one is more valuable?

 4. Why do you think that so many home insurance policies require fences around pools? What part of a home policy does this cover?

Answer 1

1.Home Insurance. The average homeowner's insurance policy covers ordinary damages. ...

Home insurance policies do not cover damage from natural disasters such as earthquakes, floods, and landslides.Generally, natural disasters are not covered by a basic home insurance policy if you live in a high-risk area, such as a flood plain or along an active fault. Typically, homeowners may purchase supplemental policies that cover a specific type of natural disaster.

2.To protect both you and their investment, lenders require homeowners insurance so that they don't lose out on the remaining mortgage amount if your home is destroyed in a catastrophic event. They're also protecting you from yourself, as you'd still be stuck repaying the mortgage on a tornado-ravaged house

Homeowners with a mortgage must buy home insurance. Mortgage lenders want you to protect your house in case there are catastrophic losses. They lent you money so you could buy your home and they still own a piece of it. They want to make sure you get enough protection so they won't lose out if your home is destroyed.

3.

What Does “Replacement value” Mean?

The term “replacement value” is defined or explained in the policy. Simply stated, it means the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose. This applies unless the limit of insurance or the cost actually spent to repair or replace the damaged property is less. Refer to your policy for the exact definition and explanation of replacement cost.

What is “Actual Cash Value”?

The term “actual cash value” is not as easily defined. Some courts have interpreted the term to mean “fair market value,” which is the amount a buyer would pay a seller if neither were under undue time constraints. Most courts, however, have upheld the insurance industry’s traditional definition: the cost to replace with new property of like kind and quality, less depreciation. Courts have varied in their rulings as to whether or not depreciation includes obsolescence (loss of usefulness as a result of outmoded design, construction, etc.).

So What’s the Difference?

The only difference between replacement cost and actual cash value is a deduction for depreciation. However, both are based on the cost today to replace the damaged property with new property.   

When you are buying property damage insurance on a home or building, you will be given the choice of whether your policy covers the actual cash value or replacement cost value of your lost items.

4.The best insurance companies will cover pools and the liability associated with them, but there are stipulations to the coverage. Whether it is an in-ground or above-ground pool, insurance companies require them to comply with the laws of the local municipality. Almost all cities and towns require you install a fence to enclose around the pools, the property where they are located, or both. If you don't have a suitable fence, for example, then your carrier will exclude them from your liability coverage.

Pools are usually covered under the “other structures” portion of home insurance policies. Homeowners insurance typically covers other structures up to 10 percent of your dwelling coverage.