Homeowner Insurance

PICK YOUR PROPERTY VALUES CAREFULLY

Ever look at your homeowner insurance policy and wonder where the Limit of insurance on your dwelling came from? 

There are basically 3 common methods for determining the value of your dwelling. The market value method attempts to estimate your homes' value if sold today. The replacement cost method attempts to determine what it would take to build a similar house today using like kind and quality materials. And lastly, the Actual Cash Value (ACV) method factors in depreciation off of the replacement cost of your home. Many people feel that market value method best estimates their home's value, the modem homeowner policy only recognizes replacement cost or ACV as acceptable valuation methods. 

While the principle difference between these two methods on your homeowner policy involves the cost of the insurance, choosing the appropriate value for your dwelling is a key element in setting rates, coverage's and avoiding possible loss settlement penalties. Using the resources of your insurance agent are highly recommended when selecting limits of coverage. They can provide estimates of your home's replacement cost using software and worksheets and explain the difference between the two methods. 

For those who desire to insure for replacement cost values and have homes built since 1960, most companies now provide and endorsement to allow the policy to guarantee the full replacement of your home and remove the uncertainly of price fluctuation on materials or labor rates if a loss should occur. This same care should be given when valuing any detached structures and personal property. 

Remember, the primary purpose of your insurance policy is to protect you from losses that otherwise would ruin you financially. The coverage / settlement should be to return you to the same position you were in prior to the loss. The time you and your agent invest in validating and setting the limits of coverage on your homeowner policy will ensure adequate coverage with no penalties if a large loss should occur. Coverage limits once set properly, are easier to maintain year after year.  

If it has been more than five years since your last insurance review, you are probably overdue.

Topic help from
Perk Reichley, CIC is Vice President of Reichley Insurance Agency, Inc
offices in Xenia and Beavercreek  937-429-0655

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