A lot of us are taking a close look at our insurance these days due to the price increases we’re seeing. Insurance agents across the country are making and taking LOADS of phone calls to help clients lower their insurance bills.
When you’re speaking with your agent, they are likely looking at their rating software on their computer screen and zipping down the list of coverages to confirm how much you want to keep buying and what deductibles you want to increase.
For the sake of speed, it’s super tempting for both you and your insurance agent to assume you understand how your insurance coverages work just by making assumptions based on the name of the coverage. Sometimes this works – such as Collision coverage on the Auto Policy. Other times it can be misleading – for example, Comprehensive coverage on the auto policy. Comprehensive coverage doesn’t cover everything (which can be inferred from the word “comprehensive”). Despite the insurance industry’s efforts to use the term “Other Than Collision” in place of “Comprehensive” many people still use the older term. Uninsured/Underinsured Motorists coverage is another non-intuitive coverage name!
Replacement Cost coverage on the Home Owner Policy is a very important coverage you do not want to make assumptions about based on the name. Having Replacement Cost coverage does not mean your policy automatically has enough coverage to replace your home. Replacement Cost coverage tells you how your policy responds when your home is damaged – it pays the lesser of the costs to fix or replace damaged property until your rebuild coverage limit is reached. You still need to specify what your home’s rebuild limit should be.
In the event it’s been a while since you’ve discussed updating your rebuild limit on your Home Owner Policy with your insurance agent, ask your agent to treat the discussion like you were a brand new customer – and start from scratch, as if they knew nothing about your house. You might find yourself increasing your home’s rebuild coverage limit instead of decreasing it! A good conversation with your insurance agent is critical in understanding your options and getting you the insurance coverage you really need!
