Michigan home insurance standards apply to all property, including vacation homes.
Any qualified home in Michigan is insurable under the law, including vacation property or a second residence. The state's Essential Insurance Act guarantees home insurance is available to you at affordable rates. Furthermore, the act makes it possible for insurance companies to set rates themselves without any approval from the state, although the Office of Financial and Insurance Regulation does monitor all insurance charges. A mortgage company will set requirements for your insurance coverage if you borrowed money to buy your property. Although there are many variations to home insurance in Michigan, two basic types are available for all property.
Replacement Cost Coverage
Replacement cost coverage is the most widely used type of home insurance. When damage occurs, this policy will pay you the amount necessary to rebuild, replace, and repair the loss. The property is returned to the original state by using the same material and building quality. As an example, a marble counter top damaged in a kitchen fire will be replaced with the same type of counter top. This kind of policy is a popular way to insure newer property because most owners would want the home returned to like-new condition. If the property is a total loss, your insurance will pay the amount the home was valued at before the damage, which will be lower than the actual replacement cost because of depreciation. Under the law, insurance providers may refuse to offer you a replacement cost policy if the property is not worth $15,000 or more. In addition, this type of coverage might not be allowed if you do not buy insurance capable of covering 80 percent of the home's replacement cost. If the value of the property is less than the cost to replace it, a company can refuse to offer you a policy of this type; however, a repair cost policy must be made available to you as an alternative.
Repair Cost Coverage
Repair cost coverage repairs and replaces your home to a similar condition before damage but can use material different from the original for replacement. This type of coverage is often used for older property. Modern building material, such as drywall instead of plaster, is used if a loss occurs. Also known as market value coverage, a repair cost policy will only pay you the current market value of the property if there is a complete loss. Repair cost coverage is more favorable for homes that have a higher replacement cost than they are worth on the market. However, in the event of a total loss, you will only be paid the market value, which might not be enough to cover the actual cost of replacing the property. Most companies will only insure the property if it is valued at a minimum of $7,500. Homeowners are required to buy insurance equal to 100 percent of the property's market value.
Supplemental Coverage
General home insurance policies cover items inside a home; however, if you have an at-home business or items of higher than usual value, you can buy additional personal property insurance. Additional coverage is also available for living expenses should your home be destroyed or declared unlivable while being repaired. If you own a home in a flood-prone area, adding flood insurance can be a valuable addition to your policy.
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