How Is Home Insurance Rated?

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Home insurance is rated in a very specific way to make things easier for you, the consumer. Find out how home insurance is rated with help from a public insurance adjuster in this free video clip.

Part of the Video Series: Home & Business Insurance
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Video Transcript

Hi, I'm Dan Odess. I'm a public insurance adjuster and I represent your interests. I'm giving you a bit of perspective on how homeowner insurance rates are decided. Homeowner insurance rates are decided based on a few items that you might want to take into consideration when you go to your agent or your broker when they're placing insurance on your home. Things to keep in mind: Replacement cost value vs. actual cash value. Sounds difficult? It is. Replacement cost value and actual cash value are two most important things to consider when homeowners' insurance rates are being placed on your property. The replacement cost value is basically, in essence, the fair-market value, cost or value, the actual value, of the sticks and bricks, you know, the actual building itself, the structure, and the value of the labor. Not the actual sticks and bricks and not the actual labor, but the value of them. And what they're doing is they're taking into consideration fluctuations in the market. Your insurance company's betting either that there's going to be a loss or there's not. And their bet is that, in the event that you're going to have a loss, this is how you're going to get paid. You want to get paid back at replacement cost value. Sometimes, you might get paid at actual cash value. Actual cash value is a depreciated amount of the replacement cost value. Now, these different types of policies will be considered when you're paying your premium. Now, your premium is a percentage of the replacement cost value and all the other coverages afforded to you in what's called the declaration page of your homeowners' insurance policy. For eHow, I'm Dan Odess. Thanks for watching.


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