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Beene Insurance Agency Blog

All You Ever Wanted to Know About Insurance

What does Replacement really mean in a Homeowner's Policy?

Many times when someone calls for a homeowners quote they can be confused about what replacement value  means. I will try to give you a brief explanation.

First, the cost of replacing your home entails many many factors, especially the costs of commodities: lumber, wall board, roofing, labor, etc. These factors change often. In the current environment of lower interest rates, home building is at a high so naturally supply vs demand is a key factor in driving up costs. Also, if you've ever done a home improvement project  such as a remodeled kitchen or bath you know how high that is! Just go to Home Depot or Lowes and price plywood and simple materials. You'll understand.

Most losses in your home are hopefully going to be partial losses: a hail damaged roof, a tree on the house, water leaking from a busted pipe etc. So, using my remodeling example above, think of all that is involved in replacing your loss. In the event of a total loss due to a fire or tornado you want to make certain you have enough to rebuild under market conditions. Policies we offer at GlobalGreen Insurance of Chattanooga Beene Insurance, offer anywhere from unlimited replacement coverage to 125% and 150% of insured value. It is EXTREMELY important that you know how much your policy offers. Policies from a well known #1 carrier who sells thru captive agents sometimes offer only a 110% coverage extra. If you own a $250,000 home that means you will only have $275,000 to rebuild it. Whereas some of our carriers would pay to rebuild no matter what it costs! Also many TOP insurance companies (many who sell exclusively thru captive agents- ones who sell only one companies policies)- will only pay for actual cash value to replace your roof!!! This could leave you paying thousands in the event of a loss. Say you have a 20 yr roof that is 10 years old. The insurance company only has to pay you for half the value!! So a $8000 roof could wind up costing you $4000 PLUS your deductible to replace. Buyer beware if you don't know!!!!!

Your personal property in your home is almost always insured for full replacement value. HOWEVER, and this is a big one, you must replace the property and then get reimbursed for the difference once you do replace it. For example, you have a kitchen fire that ruins all your appliances. Say the range was new in 2009, now it's 10 yrs old so the actual cash value of the range is a fraction of what a new one is. So, the insurance company pays you say $300 for the range. Then you go out and buy a new one for $1500. Then you file with the company and they reimburse you the $1200 difference. So what should you learn from this example?

First, make sure you have a good inventory of ALL your personal property. Many of our carriers offer cloud based storage where you can upload pictures and receipts for your personal property so that when claim time comes you will be prepared. Or simply take pictures and store it in your photos library in the cloud. 

Be sure you understand just what coverage you have. That is why you need to have a good agent who explains your policy to you. That's where we come in.

Call or shoot us an email today and Know before you Go!!!


Mitchell Beene