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Perhaps what makes California unique, in comparison to other states, is the ever-present danger of earthquakes. Many Californians still tremble at the memory of the Great San Francisco earthquake of 1906 and the Loma Prieta earthquake of 1989. Plus, seismologists persist in issuing dire warnings that the expected “Big One” has yet to come.
Strangely enough, despite being a high-risk state for earthquakes, basic homeowner insurance in California does not include protection from earthquakes.
Neither does it provide protection from floods resulting from hurricanes or quake-generated tsunamis. Flood protections could only be purchased from the National Flood Insurance Program.
When it comes to purchasing homeowner insurance in California, what should be foremost the homeowner’s mind is getting the best security for his/her home and their personal properties.
Minimum coverage may not be enough to cover damages to the home when disaster strikes. It is best to compare quotes from the various insurances companies in the state, so that one could determine which policy provides the best coverage at an affordable annual premium.
There are two categories of general coverage in California. The first is Actual Cash Coverage, which pays the home’s fair market value up to the limit specified by the policy.
Fair market value is determined through appraising other homes of a similar type, and then deducting the value of the land on which the house is built.
As mentioned earlier, Actual Cash Coverage has a fixed amount, regardless of whether the property has appreciated in value.
The second category is Replacement Cost Coverage, of which there are three types…
· Replacement Cost Coverage – This coverage has a fixed amount regardless of property value appreciation or depreciation.
· Extended (or Modified) Replacement Cost – The amount of this overage changes with property appreciation and inflation. If the cost of construction materials increases, more money will be given for repairs.
· Guaranteed Replacement Cost – The most expensive and rarely offered coverage because money will be paid out for the complete rebuilding and restoration of the home to the state before it was damaged or destroyed.
Aside from flood protection, additional coverage that California homeowners should consider include…
· Personal Property – Covers the contents of the home. The limit for this is 50% of the value of the dwelling. If the home is insured for $100,000, coverage for Personal Property would be $50,000.
· Additional Living Expense – Provides much needed funds for the homeowner and his/her family if they’re going to live elsewhere while rebuilding and repairs to their home are being done.
· Building Code Upgrade – An important coverage for buyers of old homes. This would allow them to make improvements on the old property based on state building code requirements.
· Renter’s Insurance – Provides coverage for loss of use of the rental unit (like an apartment) and personal property due to fire. This may include liability and medical payments coverage.
· Condominium Insurance – Covers improvements and upgrades to the condo unit and personal property.
· Mobile Home Insurance – Offers protection to homeowners whose permanent residences are mobiles homes such as campers and trailers.
For some reason or another, private insurance companies may reject a homeowner’s application for coverage. After three rejections, a homeowner insurance plan in California can be purchased through the California Fair Access to Insurance Requirements Plan (FAIR).
The FAIR Plan not only provides Actual Cash Value and Replacement Cost Coverage, their limited fire coverage is better than what is being offered by private companies.
Homeowner insurance in California provides coverage in the event of damage to your property from theft, fire, floods, and natural disasters as well as protects you from liability for injuries or damage caused to people on your property.
The right homeowner insurance rates from a reputable agent can help you make the best choices about this important protection for you and your family.