Buying Coverage in The Golden State

Each state has its own peculiarities where homeowners insurance is concerned. California, for example, is one of the few states where insurance against earthquakes makes no small amount of good sense. It's not unusual for their to be differences in coverage and documentation required from one state to the next. But wherever you live, there are minimums for liability protection and the like that you have to carry. Still, meeting the legal minimums isn't exactly the best reason for covering the many risks with your policy.

For many reasons, you should carry a level of protection which leaves you not only feeling secure, but which will protect your likely largest investment: your dwelling. You should seek a plan that provides you with real security as well as one that exceeds your state's minimum standards. Think of the minimums offered as little more than a place to start: protecting your residence and your way of life are worth the best level you can afford.

California Laws

In the Golden State, residential policies falls into two general categories: Actual Cash Value Coverage and Replacement Cost Coverage.

Actual Cash Value Coverage

This pays the fair market value of the dwelling up to a contracted policy limit. The way this is determined is by an appraisal based on comparisons to other homes of a similar nature, minus the determined cost of the land on which the house is built. Protection for houses under these policies are limited to a specific amount, regardless of appreciation in value of the dwelling.

Three Kinds of Replacement Cost Options

1. Replacement Cost - This level of protection is set regardless of depreciation or appreciation of the property.
2. Extended (or Modified) Replacement Cost - This level changes with inflation and the appreciation of your property. If the cost of building materials rise,for example, more money will be allotted for a repair. (Not offered by all insurers.)
3. Guaranteed Replacement Cost - Though rarely offered, this pays out whatever it costs to restore or rebuild your property - just as it was before disaster struck.

Add-ons to Consider

• Earthquake Insurers must be a member company of the California Earthquake Authority (CEA).
• Building Code Upgrade Of particular interest when buying an older residence.
• Personal Property Typical limits on reimbursement of personal property in a home are 50% of the value of the dwelling.
• Additional Living Expense Should your dwelling be destroyed, this lets you maintain your normal standard of living.
• Renters This covers the loss of personal property and loss of use of the rental unit due to fire and may include liability and medical payments.
• Condo This covers personal property and improvements to the individual condominium.
• Mobile Homes A few companies offer this type of plan for mobile homes used as a permanent residence.

In addition to private insurers, The California Fair Access to Insurance Requirements Plan (FAIR) offers both Actual Cash Value and Replacement policies, with better limited fire coverage than is available through private sector companies.