Alabama Homeowners Insurance Guide

In the state of Alabama, there are no particular laws which require you to carry a minimal amount of homeowners insurance. Generally, the need for insurance in Alabama is consumer driven or business driven. The consumers of Alabama who own homes and decide (wisely) to protect their investment with an insurance policy are completely at liberty to choose the type of insurance they get as well as the level of insurance coverage they wish to have. The businesses that drive the insurance industry for homeowners, on the other hand, do so out of a sincere desire to protect their investment and their clients from suffering undue hardship from having to continue to pay for a home in the event of a disaster that destroys it or forces the residents to move.

The vast majority of mortgage lenders, when offering a loan to purchase or refinance a home, will demand that as a condition of the loan being made, the homeowner will agree to acquire and carry an active policy for insuring the home at all times. Minimum levels of coverage will also usually be specified. This protection is in place in order to make sure that the home - which actually belongs to the lender in many legal regards until it is paid off - will be protected from the financial effects of a disaster.

Types of Insurance Coverage

Insurance coverage for Alabama includes your basic protections against things such as fire, theft, vandalism, destruction by storm effects like hail, lightning and wind, liability protection if someone should injure themselves on your property or if your property (like a falling tree) should injure someone else. One thing not common to most policies that surprises many is protection against flood damage not caused by an appliance within the home. This needs to be a rider added onto your policy or taken out as its own separate policy if you seek that kind of protection such as from hurricane damage, which of course, can happen every year.

Replacement Coverage

The best that insurance can do, of course, if you ever have to file a claim for something lost damaged or destroyed, is to offer you money to help you replace it, but how much money will you get? That depends on your insurance. There are three common levels of insurance replacement coverage:

• Replacement Cost Coverage: This is the most basic coverage you can buy in insurance and also the least expensive. If you have to file a claim, you will receive an amount commiserate with the value of the item (or part of the house) that was destroyed depreciated for however many years of wear and tear it suffered. This type of coverage can leave you with out of pocket expenses.
• Extended Replacement Cost: Similar to replacement cost coverage, this insurance will offer you a base amount for repair or replacement of a stolen item, but rather than depreciating it for time and wear and tear, it will be adjusted upward slightly based on the increase in your property values and the current market costs of replacement. This will not guarantee you the full amount to repair or replace an item, however.
• Guaranteed Replacement Cost: This insurance type is not too often seen due to its extremely high expense. What it does is guarantee that no matter what the cost is on the current market, the item, if it is lost or stolen, will be replaced at current market costs.

If you own your own home outright, that is not really an excuse to go without homeowners insurance to protect yourself and your investment. One even moderate incident can cost you many thousands of dollars, eliminating the savings you may have earned by going without insurance.