Purchasing Coverage in Alabama
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 protection in Alabama is consumer driven or business driven. Consumers who own homes and decide (wisely) to look after their investment with a policy are completely at liberty to choose the type of plan they get as well as the level of coverage they wish to have. The insurers that drive the industry for policyholders, on the other hand, do so out of a sincere desire to look after their investment and their clients from suffering undue hardship from having to continue to pay for a dwelling 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 consumer will agree to acquire and carry an active policy for insuring the dwelling at all times. Minimum levels of coverage will also usually be specified. This protection is provided in order to make sure that the house - which actually belongs to the lender in many legal regards until it is paid off - will be sheltered from the financial effects of a disaster.
Considerations to Make
A standard plan 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 house. 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.
The best that a plan 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 policy. There are three common levels of protection:
- Replacement Cost Coverage: This is the most basic coverage you can buy 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 basic offering can leave you with out of pocket expenses.
- Extended Replacement Cost: Similar to replacement cost coverage, this will offer you a base amount for repair or repurchase 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 repurchasing. This will not guarantee you the full amount to repair an item or get a new one, however.
- Guaranteed Replacement Cost: This 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 repurchased at current market costs.
If you own your own dwelling outright, that is not really an excuse to go without a policy 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 uninsured.