California Homeowners Insurance Guide

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 coverage 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 homeowners insurance policy.

For many reasons, you should carry a level of coverage which leaves you not only feeling secure, but which will protect your likely largest investment: your home. You should seek coverage that provides you with real security as well as coverage 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 of coverage you can afford.

California Homeowners Insurance Laws

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

Actual Cash Value Coverage

Actual Case Value Coverage pays the fair market value of the dwelling up to a contracted policy limit. The way the fair market value is determined is by an appraisal based on comparisons to other homes of a similar nature, minus the value of the land on which the home is built. Coverage for homes under actual cash value coverage policies are limited to a specific amount, regardless of appreciation in value of the home.

Three Kinds of Replacement Cost Coverage

1. Replacement Cost Coverage - This level of coverage that is set regardless of depreciation or appreciation in value of the property.
2. Extended (or Modified) Replacement Cost - This level of coverage that is 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 insurance companies.)
3. Guaranteed Replacement Cost - Though rarely offered, this coverage pays out whatever it costs to restore or rebuild your property - just as it was before disaster struck.

Additional Coverages to Consider

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

In addition to private insurance companies, 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.