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Insurance - Head Matters


5. Homeowner's and Renter's Insurance

a. Property damage

This protects your house against catastrophes such as fire. The decision you must make here is whether the basic coverage is enough to cover such an event. Most lenders require that you have insured at least 80% of the cost to replace the house if you have a mortgage. Any additional coverage would be an 'add-on' and require additional premium. Here are factors that you will want to consider:

  1. Geographic area in which you live
  2. Age of your home
  3. Quality of the house's construction
  4. Square footage of your home.

Most experts agree that you should buy a policy that has guaranteed replacement costs, because then your insurance company must pay for the entire reconstruction regardless of actual costs, not just up to the estimated replacement cost. To lock in this guarantee, you will need to have purchased homeowner's insurance equal to 100% of your home's current replacement cost, as defined by the insurance company.
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