Unfortunately, disaster can strike at any time. No one is immune to the threat of losing his or her home due to any number of possible hazards. But a recent survey found that most homeowners are seriously underinsured.
Marshall & Swift/Boekh, a leading insurance data services company, found that 66 percent of home-owners had inadequate coverage by an average of 18 percent. That works out to $36,000 for a typical $200,000 home. While few people would willingly choose a policy with a $36,000 deductible, which is the net result of being underinsured by that much on what may well be their most valuable asset.
Market Value vs. Replacement Cost
The market value of what your home would sell for today is very different from the amount of replacement cost coverage to properly insure the rebuilding of a home. Market value takes into consideration the land value, depreciation and other nearby mar-ket factors while the replacement cost simply reflects the cost to rebuild a home. These can be very different numbers.
For example, you can have a home that is worth $400,000 in one neighborhood while an identical home across town could have a market value of half that much, even assuming they were built on lots of equal size. But actually replacing those homes -rebuild-ing them in place using similar construction methods and mate-rials - would essentially cost the same for both. Rebuilding costs can be higher or lower than market values since factors like land value and depreciation don’t affect rebuilding. It is common for clients to question why the insurance agent is insuring the home for more than the market value thus believing they are being overcharged.
Important tip: be sure to take a detailed home inventory before any disaster strikes. Take photographs and record serial numbers where applicable, particularly on high-value personal property. You should have no less than 100 photos and store them in “the Cloud.” There are several commercial websites that can help you with this process and will automatically store this information offsite, where these important records are not vulnerable to the same disaster that befalls your home and property.
Tracey L. Wells
Your Local Farmers Agent
2402 Loganville Hwy,
Grayson, GA 30017