The state of Arizona’s conducted a homeowners insurance survey comparing insurance rates for hypothetical homes in Phoenix, Mesa, Peoria, Flagstaff and Tucson. They compared insurance premiums for dwellings valued at $100,000, $300,000 and $500,000.
The survey is interesting reading and is accessible from the State Departments website, but it does not provide specific information that you will need to know when comparing homeowners insurance for your home. Below is a little advice and a few tips you should consider:
When comparing low cost homeowners insurance, make sure the valuation for the polices being compared is the same. Valuation is the method they use in determining the amount of the loss. There normally two types of valuations used for property coverage. Actual Cash Value and Replacement cost
Actual Cash Value (ACV) is the replacement cost of your home, less the deduction for depreciation. ACV policies are cheaper, but you stand the chance of not being made whole after the loss.
Replacement Cost means the insurance company will pay the amount it would take to replace or rebuild your home with similar materials as used in the pre-loss structure. There is no deduction for depreciation. Although the premiums are usually higher than an ACV policy, it may be worth it to be able to fully replace or rebuild your home in the event of a loss.
Actual cash value policies are cheaper than replacement cost, but with ACV there is a likelihood that you may not be made whole after the loss. Replacement cost policies will fully replace or rebuild your home (subject to policy limits).
If you have the means to cover the short fall of the depreciation deduction and are willing to take the chance, then ACV policy may be your option. However, if the depreciation deduction is more than you are financially able to withstand, it is worth paying the few extra dollars in premium to put your mind at rest.