Despite homeowners routinely wanting to have and believing they have full insurance, about 21% of respondents are underinsured by significant dollar values. It is clear that this group of homeowners doesn't possess enough coverage. They would be unable to rebuild their home to it's original condition, based on today's costs. There are a number of reasons why this occurs but there is a way for homeowners to protect themselves.
What is the Value of Your Home?
Many policies simply undervalue the actual dollar cost to rebuild a property in the current economy. Home owners only need to get a home assessment from a realtor and source data on recent comparable sales to get a sense of the sale value of their home. But building costs are something entirely different. There are many factors that fall outside the expertise of the average homeowner. Generally speaking, these replacement costs are usually a much higher figure than homeowners estimate.
Why the Big Difference?
We normally buy insurance by visiting an agent or making an inquiry over the phone or online. Depending on the company, you are sometimes only providing very basic information about your home. For example, you may get questions about the age of the home, the square footage, and the address but less attention to detail that you might expect. You want a quote. Unfortunately, the rebuild cost of a home cannot be accurately calculated with such general information. In the event of a disaster, you could be in for quite a shock.
And if you fail to disclose accurate information about the house or if you are doing upgrades, for example, then you are setting the stage yourself for being underinsured.
Insurers Don't Carry the Underinsured Risk
If you are underinsured, it's your responsibility. Not the insurer. The policy often indicates that the final decision of how much insurance is needed rests on you the homeowner. The agent will likely not specifically accept this responsibility. So, it is up to you.
Why Renewals Matter
As time passes and construction costs increase, the disparity in your replacement cost and the actual rebuild cost grows. The fact is, renewals make up the majority of business for insurers.
Figuring out rebuild costs every year will show you that they are continuously increasing. Of course, premium should rise in this case. It is logic that is often not examined. Rebuild costs go up and premiums are not far behind. Materials and labour costs grow. And again, premiums must compensate for those changes. It's important for insurers to be factual in these matters.
Homeowners must be aware of the costs, risk, and facts at hand. Take the time to properly assess your home rebuild costs annually. It's another part of your overall financial portfolio and should be treated with appropriate gravity. Write things down, evaluate, and do expect an increase in your premium. There's less risk and it's the prudent way to go. Above all, you want to know you are protected.
What is the Value of Your Home?
Many policies simply undervalue the actual dollar cost to rebuild a property in the current economy. Home owners only need to get a home assessment from a realtor and source data on recent comparable sales to get a sense of the sale value of their home. But building costs are something entirely different. There are many factors that fall outside the expertise of the average homeowner. Generally speaking, these replacement costs are usually a much higher figure than homeowners estimate.
Why the Big Difference?
We normally buy insurance by visiting an agent or making an inquiry over the phone or online. Depending on the company, you are sometimes only providing very basic information about your home. For example, you may get questions about the age of the home, the square footage, and the address but less attention to detail that you might expect. You want a quote. Unfortunately, the rebuild cost of a home cannot be accurately calculated with such general information. In the event of a disaster, you could be in for quite a shock.
And if you fail to disclose accurate information about the house or if you are doing upgrades, for example, then you are setting the stage yourself for being underinsured.
Insurers Don't Carry the Underinsured Risk
If you are underinsured, it's your responsibility. Not the insurer. The policy often indicates that the final decision of how much insurance is needed rests on you the homeowner. The agent will likely not specifically accept this responsibility. So, it is up to you.
Why Renewals Matter
As time passes and construction costs increase, the disparity in your replacement cost and the actual rebuild cost grows. The fact is, renewals make up the majority of business for insurers.
Figuring out rebuild costs every year will show you that they are continuously increasing. Of course, premium should rise in this case. It is logic that is often not examined. Rebuild costs go up and premiums are not far behind. Materials and labour costs grow. And again, premiums must compensate for those changes. It's important for insurers to be factual in these matters.
Homeowners must be aware of the costs, risk, and facts at hand. Take the time to properly assess your home rebuild costs annually. It's another part of your overall financial portfolio and should be treated with appropriate gravity. Write things down, evaluate, and do expect an increase in your premium. There's less risk and it's the prudent way to go. Above all, you want to know you are protected.
About the Author:
Square One offers the only Calgary Home Insurance policy that can be truly tailored to your needs. Receive a quote and buy a policy online or by phone. Or Visit our Alberta Tenant Insurance video.
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