Finding the right replacement value to insure your home is an important part of purchasing homeowners insurance. This can be be tricky these days with the fluctuating construction costs across the country. Hello, my name is Chip Fridrich and let’s discuss the important aspects of insuring your home for the correct value AND the correct coverage.
Some markets will differ greatly based on the quality of construction, where the home is built, and if it is built by a custom contractor or a national builder.
Other factors to consider are the fact that some residences have extremely unique features that go unnoticed unless they are scrutinized in detail. These items would be very costly to replicate in a loss. Examples would include antique mantels, original hardwood flooring, marble flooring, and ornate moldings and trim work.
So, the question to ask yourself is – is my house insured properly? Is it insured for the true replacement cost? And if it is not, do I have the guaranteed replacement cost endorsement on my policy??? To receive this provision, your home must be insured for 100% of the replacement value at the time is written. Is this the case with your policy??
Customers often ask me – “why are you insuring my home for LESS than I actually paid for it”???? A simple answer in many cases is that land value is often inflated in many areas as far as real estate value is concerned. At the same time, others often ask “why in the world are you insuring my house for MORE than I paid for it???”. The answer here could be that your home may be older with unique features (like I previously mentioned) OR the simple fact that you got a good deal when you made your purchase.
As an insurance consumer, you must TOTALLY separate real estate market value and replacement value – they are two totally separate animals. Once you do this, the picture will hopefully become clearer. Residential home appraisers do a great job in providing market value for homes but giving a replacement cost for your home is not their specialty and that is when you need to rely on the insurance company appraisers to provide their analysis.
Our Agency does a great deal of homework on the front end when we price a homeowners policy. We use valuation programs to pinpoint replacement values and have a network of local contractors to keep pace with the latest trends regarding construction costs. The final step of the process occurs when the company verifies the replacement cost number through a home inspection.
Most of our carriers whose expertise is on the upper end value of homes provide on site inspections with photos, sketches, and risk management recommendations. This extra layer of service can be reassuring to homeowners in that they know their home is insured to value and there won’t be surprises down the road in the event a disaster strikes.
Don’t be the family who lost their home in a fire and was insured for $300,000 and the rebuild cost was really $700,000. Don’t be the insured who thought their one-hundred-year-old home would be built back just like it was with the same unique features from that era only to find that they had an actual cash value policy.
If you have questions about your homeowners policy, believe your home may be underinsured, or question if you have the proper replacement coverage in force, contact our Agency for a review.
I hope you have gained some insight into the complex world of insurance by reading this blog.To learn more about our Agency, contact us at info@fpa.insure. You can also find us on the web at FPA.insure.
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