Insurance Tidbits:

Is Your Home Underinsured?

Get a Homeowners Quote now!

So how much is your home worth?  Most homeowners answer this question based on the market value of their home.  The market value is based on how much the home would sell for under the current market conditions.   This value includes the structure of the home and the value of the land the home sits on.

Insurance companies value homes in a very different manner.  They are more concerned with the replacement cost of the home.  Replacement cost is the amount that it would take to completely rebuild your home in the event of a total loss.         

Underinsuring your home could be financially devastating to you after a total loss.  Several articles have been written about people who were underinsured and the challenges they faced after their home was destroyed.  Yet, with the rising cost of homeowner coverage, buying too much insurance doesn’t make financial sense either.  So unless you are a licensed contractor, how do you know if you have the proper coverage for your home?   The answer is… your insurance agent.

Most agents have access to computer programs to help them estimate the replacement cost.  These programs develop a replacement cost based on the individual features of a home.  These features include: square footage, roof material, exterior wall materials, number of bathrooms, quality of flooring, quality of the kitchen (granite counter with subzero refrigerator vs. a Formica counter with no built in appliances), and decorator extras including wallpaper, shutters, and crown molding.

One question you should ask yourself is whether your agent has taken the time to properly evaluate your home.  Has your agent been to your home?  Has your agent asked you questions to better understand the unique features of your home?  If the answer to both questions is no, your home may not be properly insured.  Call your agent and ask how they determined the replacement of your home.  Since your home may be your most valuable asset, make sure that you have adequate coverage.

Jon Gardner, CPCU is an Insurance and Financial Services Agent with Farmers Insurance who offers complimentary insurance evaluations.  His office is located at 27907 Smyth Dr., Suite #101 in Valencia.  He can be reached at (661) 775-9244