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What is guaranteed replacement
cost insurance?
ANSWER: Guaranteed replacement insurance is a
more comprehensive policy. It tends to cost more, but it
promises to cover the complete costs -- less deductible
-- of replacing a destroyed house. With these sorts of
policies, limits on the policies are not as common,
because complete coverage is more explicit.
What kind of home insurance should I get?
ANSWER: A standard homeowners policy protects
against fire, lightning, wind, storms, hail, explosions,
riots, aircraft wrecks, vehicle crashes, smoke,
vandalism, theft, breaking glass, falling objects,
weight of snow or sleet, collapsing buildings, freezing
of plumbing fixtures, electrical damage and water damage
from plumbing, heating or air conditioning systems,
according to the Insurance Information Institute, a
Washington, D.C.-based nonprofit group for the insurance
industry.
Such policies are "all-risk" policies, which cover
everything except earthquakes, floods, war and nuclear
accidents.
A basic policy can be expanded to include additional
coverage, such as for floods and earthquakes and even
workers' compensation for servants or contractors.
Home-based business-coverage, an increasingly popular
rider, does not cover liability associated with the
business.
Insurance experts recommend that homeowners obtain
insurance equal to the full replacement value of the
home. On a 2,000-square-foot home, for example, if the
replacement cost is $80 per square foot, the house
should be insured for at least $160,000. For personal
items, homeowners can increase their coverage beyond the
depreciated value of items such as televisions or
furniture by purchasing a "replacement-cost endorsement"
on personal property. Some experts recommend an
inflation rider, which increases coverage as the home
increases in value.
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