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Insuring Inflated Property

Just about all types of property cost more these days.  You need to make sure your insurance policies are keeping up!  Insuring a home is fundamentally different from insuring an auto.  Understanding how they are different will help you make better decisions.

Your auto policy’s physical damage coverage pays to repair your auto, and if your auto is totaled, it pays to buy you another used auto like the one you had.  Your auto’s Vehicle Identification Number (VIN), along with plenty of available data, provide a ton of information to insurance companies.  Each time your auto policy renews the insurance company calculates the market value of your auto, the probability of it getting damaged, likely costs to repair it or replace it, and they determine what they will charge you for physical damage coverage.  About all you need to understand is how the two flavors of physical damage coverage work, which ones you want, and what deductibles you are comfortable with. 

Insuring a home is very different.  Most home owner policies are designed to rebuild your home, not buy you another used home.  With current prices of materials and labor, the cost to rebuild your home is MUCH higher than the cost to pay for another used home (your home’s market value)!  The coverage to rebuild your home requires a specified dollar limit.  This has always been a challenge.  Homes are so unique the insurance company can’t automatically calculate the value to rebuild your home.  This means you need to determine the rebuild limit.  When you bought your home owner policy, you agreed to a limit of rebuild coverage.  To help you out, your insurance agent might have offered suggestions on what it would take to rebuild your home based on computer models and prices per square foot tossed around by local builders.  But right now, how sure are you that your home owner policy has a high enough rebuild limit to put your home back to the way it is now?  It wouldn’t cost much to get a little extra coverage!  If you haven’t discussed your home owner policy with your insurance agent in a couple of years, pick up the phone and have a good conversation about insuring your very important asset!