Property Insurance Advice

Unfortunately it’s not until disaster strikes that a homeowner discovers they are seriously underinsured.  In the event of a fire, flood or any type of catastrophic loss you discover you do not have sufficient coverage on your home.  If your damage requires significant reconstruction of your home, you may discover that due to inflation and building code changes there simply is not enough coverage to rebuild.  Regardless of the location of the property, the most frequent mistake people make regarding their homeowner’s insurance policy is to underestimate the value of their home and its contents.  It is estimated that some 60% of homeowners are not properly insured to cover the full replacement cost value of their home. But, unfortunately, we don't pay attention to this during the property search or if buying a cheap insurance.

To a word, insurance companies have operated their homeowner’s property insurance divisions unprofitably for over a decade, to operate these divisions at a profit is a rarity.

 As a substitute for guaranteed replacement cost coverage most insurance companies have replaced it with “extended replacement cost”, “extra replacement cost” and “insured to value” coverage. These policies provide replacement cost plus 20-25% property insurance coverage.  Previously a policy that kept pace with the rate of inflation was a serviceable policy for homeowners however some of the disasters that have struck in the past few years have hit areas where homes have appreciated far faster than the rate of inflation and many effected homeowners have been stuck paying the difference. A so called “law and order” policy is a variation on the guaranteed policy in that upgrades to current building codes are included, something that was not always the case with the guaranteed replacement policy.  Another form of coverage is “actual value” which is a policy that will pay out on the value of the property today after deducting for any depreciation.  In the end, regardless of what property insurance plans you choose, you must check the costs associated with the policy each year to verify any changes or increases are reflective of any changes to or increases in the value of the home.