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Homeowners are Underinsured (Fall 2008) << Back
Two out of three U.S. homes are vastly underinsured according to a recent survey.  Based on these results, the average homeowner's policy insures less than three quarters of the projected replacement cost of the home.
The survey, completed by insurance consultant Marshall & Swift/Boeckh, found that 64% of U.S. homes are not insured at a high enough level to pay for a complete reconstruction.  Nationwide, the average policy falls 27% short of the projected cost to rebuild the house.  In other words, the owner of a house currently insured for $300,000 would be $81,000 short of the funds needed to rebuild if the averages held true.
The most common reason for this, quite simply, is not having your homeowners policy updated every year.  Rising construction costs and changing building codes are raising the price tag dramatically to rebuild your home.  In addition, any home remodeling and additions will drive up the value of the property beyond the stated policy limits.
Here are some tips to consider:
1. Understand what your policy covers and does not cover. Insure your home to the proper replacement cost, not to your mortgage.
2. Your homeowner’s policy should contain an inflation guard protection.  This will increase the replacement cost for your home annually.
3. If building codes or city ordinances change, you will be required to rebuild according to these new laws.  An "Ordinance or Law Endorsement" on your policy will help pay these costs.
4. If you have an opportunity, talk to builders in your area, or friends and neighbors who have recently built homes or additions to their homes to get an idea of current replacement costs.  We have recently heard from some of our clients in the South Bay area that it is running in the neighborhood of $185-$205 per square foot!
Please review your policies as they renew each year.  If you have any questions regarding the replacement cost of your home, please feel free to contact us at AHTKY.
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AHTKY Insurance Agency, LLC
1451 W. Artesia Blvd, Suite A, Gardena, California 90248
CA License: 0C46036