It is common knowledge that homeowners have seen the market values of their properties drop drastically in recent years. Homes in the same neighborhood are selling at a fraction of the price for which they were purchased. With everyone tightening their budget, it is no wonder that we frequently get calls to lower Homeowners Insurance coverage to match the decreased value of the home. Many people are suprised to find out that this isn't always possible to do.

A typical Homeowners policy (HO3) automatically covers the dwelling for "Replacement Cost." Although your home may not be 'worth' much on the market, you depend on your insurance policy to replace your home with new materials in the event of a claim.  This means that the insurance company has to take into consideration the worst case scenario in which the existing structure has to be torn down, the debris removed, and a new house built with brand new matierals.  Insurance companies rely on cost estimating programs to determine the approximate replacement value of each home. Despite the drop in market value, most of the values for the cost estimators haven't changed. You might think that since the economy is so slow and there are so many contractors out of work, the cost of new construction would be cheaper than it was in years past. But keep in mind that a major storm event could dramatically increase demand and reduce supply. Even though many people feel the current replacement cost estimates are unfairly inflated, they could find themselves under-insured in the aftermath of a category 5 hurricane that wiped out the local lumber yards and home improvement stores.

If you truly feel you are over-insured, you can ask your agent to do an updated replacement cost estimate of your home. However, don't expect the result to mirror the current market value of your home. After all, the market value is affected by age, condition, and location. The Homeowners policy is designed to replace the home with a new one.

With the Department of Financial Services inspecting more and more insurance companies for solvency and with the threat of the hurricane season upon us, what are we suppose to do?

It is FDFS's  responsibility to be certain that  the insurance companies are sound and practice good underwriting guidelines which assures the policyholder that the company will have enough money to pay claims if a disaster occurs.

One of the areas that you, the homeowner, can control is the maintanence of your property.  Because more and more insurance comanies required periodic inspections of the property they insure, it is important to repair any damage that compromises your home, such as  rotted wood, loose gutters and broken windows and doors.  

 

 WHAT ARE 3 WAYS TO REDUCE YOUR HOMEOWNER PREMIUM?

   With homeowner rates on the rise, there are some ways to help make it more affordable.  Be sure to consider carefully how your choices affect the processing of a claim.

              1.  Increase your deductibles
              2.  Remove the replacement cost on contents
              3.  Have a wind mitigation inspection (roof inspection) done