Levels of Coverage on your Homeowner's Policy

When you live in Los Angeles, your home may be put in a variety of perils.  Each year California and the Los Angeles area battle with wildfires.  These wildfires can be the result of a variety of sources, but are generally common due to the dry vegetation and the lack of rain the area often incurs.  Other natural disasters include hurricanes, flooding, earthquakes and a number of other disasters that may occur.  These disasters make knowing your homeowner's policy important as well as the different levels of coverage it provides you.

There are three coverage options. These are actual cash value, replacement cost and guaranteed or extended replacement cost. The actual cash value will pay to replace possessions in the home minus depreciation as well as the home.  Replacement costs will pay the cost of rebuilding your home or repairing your home in the event of a disaster.  It may also pay for replacing possessions without a deduction for depreciation.

Guaranteed or extended replacement cost offers you the highest level of protection should something happen to your home or belongings.  A guaranteed replacement cost policy will pay whatever it will cost to rebuild your home to the way it was before the disaster occurred, even if it goes over the policy limit.  This provides the homeowner protection against a sudden increase in construction costs due to a shortage in building material, such as lumber, especially in the situation that there is wide spread damage over an extended area.  This type of coverage is good for those individuals who lose their homes in the Los Angeles and San Diego wildfires or other wildfires that occur throughout the state of California.  However, it may not pay for the cost of upgrading the home to comply with updated building codes. If you need to update a home for this need, you may be able to obtain an endorsement policy that is known as an Ordinance or Law to help pay for these costs.

Many insurance companies will offer an extended, instead of a guaranteed, replacement cost policy.  This policy will pay for a certain percentage over the limit to rebuild a home that was destroyed by a natural disaster or fire.  These are usually twenty to twenty-five percent more than the limit of the policy.  For example, if a homeowner has a policy for $100,000, they may receive up to $20,000 extra to help with the expense.  The guaranteed and extended replacement cost policies are generally more expensive, but they do offer the best financial coverage that you can get in locations such as Los Angeles.

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