What your home policy actually excludes

Replacement cost vs. actual cash value

Replacement cost pays what it costs to rebuild or replace an item today, with no deduction for age or wear. Actual cash value (ACV) pays replacement cost minus depreciation — so a 10-year-old roof might be reimbursed at a fraction of what a new one costs.

What standard policies typically exclude

• Flood damage — requires separate flood insurance, often through a national program, regardless of how far you are from a coastline
• Earthquake and earth movement — usually a separate policy or endorsement
• Sewer and drain backup — commonly excluded unless added as an endorsement
• Maintenance-related damage — gradual leaks or mold from deferred maintenance are treated as a maintenance issue, not a covered loss

Dwelling coverage vs. personal property

Dwelling coverage insures the structure itself; personal property coverage insures the contents. A common mistake is insuring the dwelling at the purchase price rather than the current rebuild cost — construction costs rise independently of home sale prices, and a policy that hasn't been updated in years can leave a real shortfall.

Common mistakes

• Assuming market value and rebuild cost are the same number
• Not documenting belongings (photos or a simple inventory) before a claim is needed
• Skipping an umbrella policy despite meaningful savings or assets to protect beyond the home policy's liability limit

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