With real estate market values down as much as 50%, many homeowners assume that the cost to rebuild their home has also dropped.  Unfortunately, this is not necessarily true.  Tax assessments and market values are unrelated to the cost to rebuild a home.  Another over looked factor is that the cost to rebuild or repair a home is more than new construction.  Demolition of damaged property is an additional expense that the new home builder does not have to factor in.  In cases where a home is only partially damaged, the costs can be even higher because the builder must try to salvage the undamaged property.

Most home owners pay very little attention to the coverage on their homeowners insurance policy until after they suffer a loss.  Then, it really is too late.  The time to review your coverage is before the loss occurs.  No one wants to pay more than they need to for insurance, but it makes very little sense to penny pinch when you are talking adequate coverage for your home.  I have never had a customer complain about being over insured following a catastrophic loss. 

To be sure that your home is insured properly you should contact your agent and ask them to perform a “Replacement Cost Inspection” if one has not been performed in the last 3 years.  You should also make sure that your policy has Replacement Cost Plus coverage.  This will provide you with a loss settlement that replaces your home with new materials and without deductions for depreciation.  The “Plus” means that if the cost to rebuild should unexpectedly increase due to higher material costs or labor costs you will have an additional amount available to pay those expenses.  Your home should be insured to 100% of its replacement cost.  If your home is insured to less than 80% of its replacement cost you may risk losing the replacement cost loss settlement endorsement, which would result in a depreciated settlement. 

The next important thing to look at on your policy is the amount of coverage for your personal property.  Is the amount on your policy enough to pay for all of your stuff?  Also, does it have replacement cost coverage?  Replacement cost coverage for personal property is usually a multiple of the actual cash value.  For example, if your old T.V. is damaged by a covered loss the insurance company will determine its Actual Cash Value(ACV) and then multiply that number by the replacement cost factor.  Usually, that factor is 400% of the actual cash value.  So, if the ACV of your old T.V. is $200, then the replacement cost settlement would be $800.  Check your policy for details about how your company settles personal property losses.

One of the most overlooked coverage’s on a homeowners policy is the Additional Living Expense coverage.  This is the amount available to you in the event your house is uninhabitable for a period of time while it is being repaired.  Some companies limit customers to a period of time while other companies use a dollar figure.  It is desirable to have a dollar figure rather than a specified time because it often takes longer than the typical 12 months of coverage allowed on policies.  You should look for a policy that offers at least 75% of your dwelling coverage for additional living expenses.  The more coverage the better.  Often times, following a catastrophic loss, it can take more than a year to rebuild a home.

Last, but not least you need to take a look at the liability coverage on your homeowners policy.  This is the coverage that is likely to protect you if you are sued because you are responsible for someone else’s injury or property damage.  For example, your son or daughter accidentally hits a team mate with a baseball bat while warming up in the batters circle.  Or, your golf ball goes astray and hits another golfer.  If your dog bites a neighbor or your back yard barbecue accidentally burns down the neighbors house, you are liable and you are going to want to have as much liability coverage as possible.  All of these examples of liability losses come from real life claims.  Most insurance companies provide $300,000 of liability coverage.  That may not be enough to rebuild your neighbors house or to pay off the family of the child whose face needs reconstructive surgery following the batting circle accident.  Increasing liability coverage on your homeowners policy is inexpensive.  Most companies will charge less than $20 to increase your limit from $300,000 to $500,000.  Some companies will offer a limit of $1,000,000 for a little more.

Call your agent today and ask them to review your coverage.  Better to know what you have before the loss.  Once you suffer a loss, you may find out how valuable your policy is the hard way.  If you would like to get a second opinion on your policy, give us a call or drop us a note at info@griffinowens.com.  We will review your coverage and offer you competitive rates from other major insurers.  We don’t pressure people to buy, we just offer our professional opinion.  Hopefully, after talking with one of our agents you will be able to evaluate your policy and know if you are adequately insured.