Troubled Times and Your Home Insurance

In the current financial environment of job losses, reduced home values and foreclosures, home owners are looking for ways to save money.  One of the areas that homeowners look at is their property insurance.

One of the first things you should do is contact your insurance agent and review your policy to make sure you are taking advantage of discounts like available to most policyholders: security system discounts, new home discounts, and discounts for having your home and auto with the same agent or carrier.  Also ask your agent at the time of renewal of your policy to get competitive quotes from other carriers to make sure you are still getting the proper coverage at a competitive price.  Some agents, like Judge Fite Insurance Agency, do this automatically at the end of your policy period.

There are two big mistakes that homeowners make during times like these. The first is requesting that the coverage of their home be reduce to match the reduced value of their property; the second mistake is, if the homeowner is really desperate, letting their insurance coverage laps to save on the premium.

Lowering the coverage of your property to match its tax value or potential selling price appears to make good economic sense but in reality these numbers do not reflect the replacement cost for damages or total replacement of your the home.  In other words, leaving the property underinsured.

There can be severe consequences for not having proper replacement limits of coverage in place.  Even a partial claim, like damage to a roof, can result in a dramatic reduction in the claim amount paid by the insurance company if a property is not fully insured.  At the time of loss, if the limit of liability on the policy is less than 80% of the full replacement cost of the dwelling, the insurance company will only pay a proportionate share of the full replacement cost.

Insurance carriers use sophisticated Replacement Cost calculators that work in the background to insure that your property has the proper amount of coverage.  The calculators take into account several variables that are based on statistical history of loss,  square footage, construction costs and zip code.  Other variables such as swimming pools, past claims history, and the age of the roof are determined on a case by case basis and may impact the premium.

Letting your insurance policy lapse may sound like a good temporary solution to a cash flow problem, especially if they know that the mortgage company will place insurance (forced insurance) on the home when they find out.  It really is the worst thing you can do as a policyholder.  There is the gap in coverage…what if there is a claim and there is no insurance on the property? When your mortgage company does find out they will insure it but only for their interest in the home, not yours, back dated to the day the policy lapsed and the cost to reinstate the policy can go up in the range of 3.5 to 4.5 times higher in many cases

If you find your self in financial trouble make sure you talk to your insurance agent so you have all the facts before you make a big mistake that could cost you your biggest personal investment.

For more information about insurance for you home, investments, vehicles, or business, contact Judge Fite Insurance Agency today at insurance@judgefite.com or 214-446-2572.

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