Insurance of your residence

How often do we get our photo albums out to see the pictures that take us back in time to our youth, to that care free time? Turning pages, we smile, remembering, how brave and careless we’ve been. How much fun we had, how life seemed to be so easy, without headaches and heartaches, without problems of adulthood and bills. Speaking of… How often do we check on our homeowners insurance? I bet you have forgotten where it is. But it really needs our attention. We should keep it updated; otherwise it might hurt us in the end. So get it out, dust it off and read your policy to know the limitations and exclusions, give a call to your agent to modify the policy coverage.

Make sure you insure for 100% of the estimated new replacement cost. It is much easier to pay a little extra premium than suffer an out-of-pocket loss of thousands of dollars from not having enough coverage to rebuild if your home is destroyed or having your repair costs depreciated on partial damages.

If you insure your home for depreciated values, at claim time the insurance company deducts depreciation from repair costs. For example, you insure your 100-year-old house for $250,000 (depreciated market value). But the cost to completely rebuild it now is $500,000. If you insure your residence for less than 80% of the home’s full replacement cost, your claim settlement will be depreciated; in this case $250,000 is far less than 80% of $500,000, so the insurance company will settle with you on a depreciated basis.

If you insure for the cost to rebuild, the insurance company pays the full repair costs at claim time. Meaning, insuring your residence for its cost to build new, or at least 80% of that value, the insurance company settles your claim for the full replacement cost of the damage - up to the limit of your policy.

A wonderful thing is to add a Home Replacement Guarantee, if it’s available, which covers the cost of replacement or repair of your home without any deduction for depreciation.