Be Weary When Cutting Costs on Homeowners Insurance
What could be better than saving money on Homeowners Insurance? Certainly saving money on insurance premiums while also maintaining adequate coverage! Shopping around for a better deal on insurance is a common occurrence for many homeowners. However, when it comes to homeowners insurance, it’s extremely important to make sure that your agent is diligent in explaining exactly what you are getting in return.
Often times, homeowners go with the cheaper premium in order to save money and don’t realize what they are giving up. One of the most common forfeitures of coverage is the removal of Replacement Cost valuation for personal contents. In a cost saving measure, agents may choose to forego personal property replacement cost coverage and offer Actual Cash Value (ACV) instead. While the total dollar amount of the personal property limit is unchanged, making it appear to be equivalent on the quote, the coverage is substantially diminished.
The reason that Replacement cost is a better layer of protection is best described in the example of a claim to your homeowners insurance. If your home is damaged from a covered peril and the loss includes many of your personal belongings and electronics, Replacement cost coverage requires your insurance company to reimburse you in the amount that it would take to refurnish your home with brand new furniture and electronics. It basically affords you the ability “Replace” all the damaged personal belongings. However, if your agent swapped out the better coverage for ACV, then the value of all your affected personal contents would be reduced based depreciation. Thus leaving you with a small percentage of what it would cost to replace your television.
The stark reality is that many homeowners are completely unaware of this because their insurance agent did not take the time, or care, to explain the difference. Instead, many agents try to get the price as low as possible in order to win your business. The brutal reality isn’t usually detected until after a claim is filed and the adjuster explains that the age of the furniture in the home limits the insurance payout to pennies on the dollar of its original cost, and more importantly, what is needed to replace it.
Many homeowners are also under the impression that if they satisfy their lender, then the insurance must be satisfactory. This could not be further from the truth. Replacement Cost coverage is only required by lenders for the building, or home itself, but not on the personal contents inside the home. The basis for this is that the lender is not financing your personal property and therefore isn’t concerned if you no longer have furniture or clothing. The best practice that homeowners can take is to make sure you are informed and that your insurance agent is diligent in their explanation of the coverage you are afforded by your Homeowner’s policy. This allows you to make an informed decision and weigh the risk of saving a few hundred dollars on insurance costs versus limiting the ability to replace your personal property.
Moore Resources is an Independent Insurance Agency located in St. Petersburg, FL and offering Homeowners Insurance, Auto Insurance, Personal Insurance and Business Insurance. Our reach extends beyond the Tampa Bay area to the entire state of Florida. Moore Resources has regionally been dedicated to serving the local residents of Pinellas, Hillsborough, Polk, Pasco, Manatee and Sarasota counties; including St. Pete, Tampa, Clearwater, Bradenton, Brandon, Dunedin, Gulfport, Lakeland, Largo, Lutz, Palm Harbor, Pinellas Park, Riverview, Ruskin, Seffner, Seminole, Temple Terrace, Tierra Verde, Town n Country, and the Gulf Coast Beaches.
Please remember that the purpose of this blog is to present general information only. It does not interpret specific policies or coverage. In order to obtain detailed information regarding your insurance, contact a licensed insurance agent.