​When clients buy a home and purchase the needed homeowners insurance, they might hear the word escrow thrown around. Let's look at what escrow is, how it is used, and how it can benefit you as a home buyer or homeowner.

Actual Cash Value is the depreciated value of an item of property at the time of the loss. This type of settlement does not allow you to replace what you have lost. Instead, it compensates you for the value of an item as if were being sold at a garage sale. Think of actual cash value as the replacement cost of an item after depreciation is taken into account. In fact, actual cash value is simply replacement cost minus depreciation. So how does it work? Let's look at actual cash value with a few examples.

Replacement cost is a term generally used in homeowners insurance. It basically states that if you have a claim, you will be compensated for the cost of replacing the property using today's prices. It allows you to put yourself in the same position you were in prior to the loss. It provides you with the necessary money to replace your items with another item of like kind. Compared to actual cash value, replacement cost does not take depreciation into account, so it is more favorable to you as a homeowner. So how does it work? Let's look at a few examples.

Yes, it does, but only up to a certain limit. Homeowners insurance policies typically provide limited coverage for jewelry. Insurance policies differ from one company to the next, but policies typically limit coverage for jewelry and other types of valuable items. The most common of homeowners insurance policies in New York impose a limit of $1,000 to $2,000 for loss by theft of jewelry. If your $15,000 diamond engagement ring is stolen, you might only receive $1,000 for the diamond ring.  

Tree damage is considered a "falling object" when it comes to homeowners insurance perils. If a tree falls on your house or other structures due to a covered peril (such as a windstorm, lightning bolt, falling object), your homeowners policy will take care of it. The tree doesn't even have to be from your own yard to collect compensation. The tree can be from a neighbor's yard or from public property. As long as you have the right coverage, you should be protected.