Are You SURE You Have Enough Insurance?

Just about every day, you can pick up the local paper (or online paper, or Twitter) to read about a family who lost their home to fire and discovered that they didn't have enough insurance to rebuild. Case in point, this morning's story, "Insurance will only cover about $160,000 and preliminary estimates indicate it will cost at least $200,000 to rebuild the structure."  Where will this family round up the missing $40,000+ for their home?

With these types of stories continually staring you in the face, why do you balk when your home insurance renewal increases the coverage on your home by a meager 2%?  You know who you are.  You are not alone.  Insurance agents across the country field these calls on a daily basis.  The dialogue is something like this:

Homeowner:  "I just got my renewal.  Where do they get these amounts?  I WISH I could sell my house for $250,000!  In this market, I would be lucky to get $200,000 for it."
Agent:  "I appreciate your concern, Mr. Homeowner.  Insurance is based on the replacement cost of the home; not market value."
Homeowner:  "That's ridiculous.  I can't afford this premium.  Please reduce my coverage back to what it was last year or I am moving my coverage to Compete-Cheap-Insure-Agency, down the street".

To the average American, your home is your most valuable investment.  And yet, some statistics shows that two out of three homes are underinsured.  Were you aware that the typical home insurance policy requires  that the homeowner insure the building to at least 80% of what it would take to replace the dwelling?  Replace, not sell.  Once that provision is met, the typical homeowner policy will pay up to policy limits.

Many home insurance companies offer "Additional Replacement Cost" coverage that will automatically increase your maximum amount of dwelling coverage by 25%, 50% and in some cases, a "guarantee" to replace the home, whatever it costs.  The additional premium for this invaluable coverage is usually around $25.

Another thing to consider is the cost of rebuilding your home up to code.  City, county and state ordinances will undoubtedly add costs to your rebuild.  Are you aware that some cities are considering a code addition to require the mandatory installation of fire sprinklers in new home construction?  How much will that set you back?  Yes, these ordinance or law costs are typically covered by your insurance but are limited to 10% of your building coverage amount!  You can, and should, purchase increased ordinance or law cost coverage.

Are you SURE you have enough insurance?

I know home insurance premiums are on the rise but there are ways to get the disaster coverage you need at a price that will fit in your budget:

• Consider increasing your deductible to a $1,000 or higher
• Ask your agent to shop your coverage with all of his companies to make sure you are getting the best coverage for your premium dollar
• Talk to your agent about your "insurance score" - what can you do to earn the preferred rate?
• Bundle your home, auto and umbrella policies with the same carrier for maximum discounts

If you still feel the replacement cost figure that your insurance company has is off-the-mark, spend some time assessing your home's replacement cost by visiting AccuCoverage.com.  For $7.95, you can accurately input your home's features into the same building-cost data base that insurers use.   Another option is to invite your Trusted Choice Agent to your home for a good old-fashioned home insurance review.  After all, who better than you and your local agent to calculate your home's replacement cost?