Is Your Home Adequately Insured For The Rates You Pay?

by Joy Block - Date: 2007-08-14 - Word Count: 251 Share This!

Despite the high rates they pay, most homeowners do not realize that"replacement cost" insurance is seldom a guarantee of full replacement.This common misunderstanding can lead to a false sense of security.There are steps you need to take to make sure you are insured to value.Typical insurance policies will limit the replacement cost by relatingit to the declared value at the time the policy was purchased. Not onlyis the coverage more encompassing with a better policy, it also usuallyoffers more options to preferred customers.Replacement costusually can only be counted on to pay the declared rebuilding value,rather than the market value. And this is usually where the confusioncomes from.Several factors effect the replacement cost whichwill generally be much higher than what you have indicated on yourpolicy. These include increased lumber and labor costs and new buildingstandards.The rebuilding cost for even a relatively new homewill still be higher. And the gap widens for high end propertiesbecause of custom construction.Is Enough Enough?Manyhomeowners are under insured. They have not bought enough insurance tocover the replacement value of their home. Many are over insuredbecause they calculated their insurance needs by including the value ofthe land.Consider Your Comfort Level. Youcan determine your deductible level. A higher deductible cansignificantly lower your monthly premiums. However, you may feel morecomfortable paying higher rates just in case disaster strike. Choosethe highest deductible you can afford. The one problem with this isthat smaller claims such as broken windows will have to be covered byyou, the homeowner.

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