Insurance To Value- Preventing Claims Issues

Hello.  I hope everyone had a restful and enjoyable holiday season.

This month I wanted to touch on the important subject of insuring property “to value”.  In other words, properly insuring dwellings and structures adequately to avoid penalties built into policies when a loss occurs.

In order for the replacement cost provision to trigger in those policies which make it available certain requirements must be met.  One of the most important of those requirements is “co-insurance”.  Co-insurance simply means one must insure their dwelling or other structure to at least a certain percentage of it’s estimated replacement or reconstruction cost.

This co-insurance percentage is normally at least 80% of the replacement/reconstruction cost, but can be 90 or even 100%, depending on the policy language and the company writing that policy.

When a claim arises,  it will be determined if the co-insurance requirement has been met.  If it hasn’t, various penalties will result which will always result in a lower claims payment.  These penalties can vary from contract to contract and company to company.

So read your policy carefully.  If you feel this requirement is not being met, contact your agent or company for a re-evaluation of the structure in question.

Also, remember that meeting this requirement (if replacement cost is your wish) can cost more since higher values are required.  Of course, as mentioned in my previous blog, use higher deductibles to offset some of this increased premium cost.

Ask your agent to provide the cost savings for various deductible options so you can make an informed decision.

Until Next Month,

Brian E Matthias

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