Many Home Insurers Undercharging
You might think the headline of this article portends good news — we might think that we’d enjoy paying less than we really should to insure our home. We’d feel like we’re getting away with something. But if your house burns down, you’ll be feeling something else: sick to your stomach, as you learn that you were not only undercharged for your homeowner’s insurance, but also underprotected. Let me back up a bit and explain.
In a nutshell, many Americans are not carrying enough insurance on their homes to cover rebuilding them. It’s not enough to base your home’s replacement value on what you paid for it, or what the market price for it is. Consider, for example, an old house. If you buy it, you may not need to make a lot of changes to it. But if you have to rebuild it, you may need to invest a lot of money updating it and bringing it up to code.
Other contributing factors to this growing problem include insurance agents who may not always do a good job of determining how much insurance you need. (Did your agent quote you your price over the phone, without having asked you lots of questions?) And then there’s the rapidly rising cost of building materials. (See “Construction Costs Soaring.”)
As MarketWatch’s Ray Martin has explained: “Most homeowner policies sold today are called ‘extended replacement coverage’ or ’specified additional amount of insurance,’ which only provide coverage up to the dwelling limits specified in the policy plus an additional amount of up to 20% — and not a penny more. And if you have an existing policy with ‘guaranteed replacement coverage,’ expect a notice from insurance company upon the policy anniversary that your current coverage will be replaced with this more limited form of coverage. This development places more responsibility on homeowners to ensure that they have adequate coverage.”
If you haven’t examined how much your home is insured for lately, do so. And perhaps do a little research on the side, too. One helpful tool might be a property value report from a website such as www.insuretovalue.net. For free, it offers a replacement cost report and a competitive insurance quote. For a few dollars, it offers an estimated replacement cost report for your home, based on the property’s characteristics and local pricing levels.
(Source: Selena Maranjian, Motley Fool)
For more information, contact MillionSaverHomes.com a local Las Vegas real estate broker at 702.212.3513.
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