Homeowners insurance is an essential safeguard for those who own property, yet many people may not fully grasp the nuances of coverage options.  

Whether you're a first-time buyer or a seasoned homeowner, understanding the differences between replacement value and actual cash value, as well as the risks associated with inadequate policy coverage, can save you thousands of dollars in unexpected costs. 

Todd Glover and Sarah Musial of Todd Glover’s State Farm Agency in Manitowoc and Cedar Grove provide insights for homeowners insurance on the latest episode of At Home on the Lakeshore with UnitedOne Credit Union’s Local Home Loan Experts. 

The views and opinions expressed by the homeowners insurance agents quoted in this article are their own and do not constitute an endorsement by UnitedOne Credit Union. You are encouraged to evaluate your own individual needs and seek guidance from insurance professionals before making any decisions. 

A common area of confusion in homeowners insurance is the difference between replacement cost and actual cash value. Replacement cost covers rebuilding or repairing a damaged home using modern materials without deducting depreciation, whereas actual cash value factors in depreciation, meaning homeowners may end up paying more out of pocket. 

“It's possible to have a policy that's called a replacement cost policy that, in certain circumstances, may not actually cover the roof in that fashion,” said Glover, who advises homeowners to sit down with a professional to review their policy carefully to avoid unpleasant financial surprises, especially regarding roof damage from hail or wind. 

Musial stressed homeowners should verify how their policy handles claims related to roof damage to prevent costly out-of-pocket expenses, “Some companies out there are excluding roofs altogether depending on the age of the roof,” she said. 

Homeowners should also be wary of policies that suddenly change or have significant differences in pricing from standard offerings.  

“That should probably be ringing some bells,” Glover cautioned of significantly lower premiums than competitors, recommending homeowners review the fine print of their policies and consult an expert before committing. 

Regularly reviewing an insurance policy is another smart practice.  

“We always offer them to bring us the quotes they have, and we're happy to sit down to make sure that what they're getting is as good of coverage as they have with us — or better,” Musial said about a policy evaluation. 

Another area where homeowners often misunderstand coverage is flooding.  

“Flood is an excluded cause of loss,” Glover said. “The only way to get coverage for that is to get a flood policy.” 

The federal government oversees flood insurance programs, but local agencies can help homeowners obtain this critical coverage. 

Sewer backup and sump pump failures are also excluded from most homeowners insurance policies but can lead to costly damage if left unchecked.  

“It offers you either 5% or 10% of your personal property amount for your basement if the sump pump fails or the sewer drain backs up,” Musial said about coverage plans for sewer backup and sump pump failures.  

This type of policy addition can help cover restoration services, drywall repairs, and furniture replacement. 

Homeowners insurance is more than just a financial safety net — it’s a key part of homeownership that requires careful planning.  

Understanding policy terms, replacement vs. actual cash value, flood exclusions, and additional coverage for sump pumps and sewer backups can help homeowners protect themselves from surprise expenses.  

Regular policy reviews and consulting a professional before making changes are the best ways to ensure adequate coverage. 

By staying informed and proactive, homeowners can avoid unexpected hardships and ensure their property remains properly protected against various risks. 

When it comes to home loans, it’s best to discuss your situation and options prior to putting in an offer on a house. The Local Home Loan Experts at UnitedOne Credit Union will help you navigate the process and are your trusted source in Manitowoc and Sheboygan for all your home loan needs. 

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