Before the real estate crash, we occasionally would receive phone calls from clients questioning whether their home was under-insured. The reason? They had purchased it for a much higher amount than what it was being insured for. They figured it should at least be insured for the purchase price.
Now, several years into the recession and amid a severe housing slump, clients are calling asking if we are insuring their home for too much. Are we over-insuring their home, they want to know. The reason? Home prices have fallen dramatically up to 40% or more in some areas and read about slumping home values.
When considering your home insurance, be sure to not confuse how much a home is bought or sold for versus what it takes to rebuild a home from scratch in an emergency situation (such as a total fire loss).
Typically our carriers provide very decent coverage on homes, often much more than what a client has paid for it and higher than many other carriers we encounter. While clients may wonder if we are providing too much coverage, the bigger issue is what happens if you are under-insured.
And no doubt we occasionally run into carriers who are willing to insure homes for substantially less than what we do. Can they really rebuild a home for much less coverage than our carriers? Or are they low-balling the coverage to obtain the business? Who is right?
According to a March 15, 2011 article in the Wall Street Journal (online), Marshall – Swift believes that upwards of 2/3 of all homes are UNDER-insured. Marshall -Swift is the company responsible for determining how much a home should be insured for. Their service is used by many insurance companies.
According to Xactware, a company that tracks trends in the property insurance and construction business, the cost of building materials rose sharply in 2008. Now with gas prices up to nearly $4 a gallon in many parts of the country, the cost to deliver building materials is rising as well.
If you believe your home is under-insured or over-insured feel free to speak with your agent. But the bigger issue is whether or not your home is under-insured. In the event of a claim a home that is insured for less than what it takes to rebuild will leave you very dissatistified.
I received an email from a client who was looking at buying a single family dwelling for a rental property. We ran the quote and emailed it. The client emailed back wondering whether we were over-insuring the home.
It is a question that probably every insurance agent has received.
Before the real estate crash there were clients who thought we were under-insuring homes. If they were paying $325,000 but we were insuring for $275,000 they believed we were not adequatly insuring the dwelling. Now that they are paying $150,000 and we are insuring for $275,000 they believe we are placing waaay too much coverage on the dwelling.
It is easy to confuse the two points, perhaps. However, whatever you buy or sell a home for has little to do with the cost of rebuilding that home.
PLUS, there are coverage on a home that have nothing to do with the dwelling itself. A home policy covers your personal property. The home policy pays to clean debris away. It protects you against claims made for liability or medical reasons. It provides money for you to live elsewhere if that home is unliveable. Or, reimburses you if a tenant moves out and you need reimbursed for lost rents.
While no one wants to overpay for their insurance, the fact is everyone wants their home put back like new if it is damaged or destroyed. To that end, you are welcome to ask questions and even question the coverage being placed on your home. However, the end result is that you AND your insurance company wants to see you made whole again if the worst happens with your home.
If you want a quote on Arizona Home Insurance, please contact us today!
Filing Homeowner Insurance Claims
When we buy insurance of any kind there is a premium/cost to us as consumers. All we really ask in return is that the company providing the coverage do their part when there is a claim. And for the most part insurance carriers do a pretty good job handling claims (in my opinion) overall.
But what is often not understood is the repercussion of filing multiple homeowner claims.
In Arizona, insurance carriers commonly non-renew Arizona home insurance policies that have two (2) or more claims within a 5 year period.
One simple piece of advice can save you alot of grief.
Carry a high deductible on your home insurance policy and avoid the temptation of filing a small claim. One person reportedly had a water claim a few years back. Then, a couple years later believed they had been the victim of a theft and called the insurance carrier only to discover the item missing was not missing afterall.
Even though this person tried to cancel their “theft” claim it was too late. The insurance carrier already had reported it to the claims loss underwriting exchange. Now for the world to see they had two claims on their record.
The result? The client was non-renewed for having two claims within a 5 year period. When they shop for new home insurance the rate will likely be substantially more due to their claims history.
Be careful filing small claims. And be especially careful filing two home insurance claims within a 5 year period.