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Do You Have Enough Homeowner's Insurance?
You've finally done it. You've signed the contract to buy your dream home. You're getting ready to close and the bank tells you to get homeowner's insurance.
How much should you buy?
For your most complete protection, your coverage must equal at least 80 percent of the actual cost of rebuilding your home. Even closer to actual replacement cost (90% plus) is better.
Unfortunately, some homeowners will choose to save a few dollars by insuring their home for much less than its replacement cost. A total loss is pretty unlikely, but you are really taking a gamble by not getting the right amount of coverage.
Unless a home is insured for at least 80 percent of its replacement value, the policyholder may be in for a surprise, especially in the case of a partial loss. That's because partial losses on underinsured homes are not paid in full. If you insure your home for less than 80 percent of its value your claim for a partial loss will be reduced to a portion of the loss based on the coverage. Was it really wise to save $50 in premium?
The chance of being underinsured increases after you have owned your home for several years and it has appreciated in value. While you may have obtained the proper coverage when you purchased the home, rising inflation and real estate appreciation may have pushed your coverage to below 80%. Some policies do have an inflation guard option that will increase your coverage at regular intervals. The best way to insure proper coverage is to review your policy with your agent at the policy anniversary. When is that? (Hint) It is when you get the annual bill.
Proper replacement cost also protects your belongings. With a replacement cost endorsement on your policy you will be reimbursed for the actual cost of any lost items.
http://www.concordelending.com/concerns.htm#Homeowners
