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June 5, 2013 / roqueagency

What is Coinsurance?

Recently, I attended a meeting of about 75 local business professionals from all across the MBORO TORNADO REMNANTS2County.  The building in which we met, overlooked several properties where homes had once stood before being destroyed by the Good Friday Tornado of 2009.  Do you remember that day?  I sure do, as it passed only six blocks from my own home.  Hundreds of homes in our community were either severely damaged or destroyed, as were these in this picture.  That’s when it dawned on me, “Why hadn’t these homes been rebuilt back like so many others following that day?”  After a bit of investigating, I discovered the reason.

You ever ask yourself, “What amount of insurance should I carry on my home’s structure?” Should you insure it for what the local real estate market indicates it might be worth or how much you paid for it at purchase?  Or, maybe it should be insured for how much the local government taxes you on it or perhaps even a recent appraisal?  The answer is, no one of the above.  Your home should be insured for 100% of its cost to be fully replaced, taking into consideration such things as local labor market, building material costs, amenities in the home, local laws and ordinances as well as the laws of supply and demand.

Homeowners aren’t often aware or don’t realize their home insurance policies likely contain a “Coinsurance” clause.  Some of the more commonly issued coinsurance percentages are 80% but can be as high as 100%.  Coinsurance, in essence, is the responsibility imposed by the insurance industry on the homeowner to accurately report/declare/insure the value of their property.  Sure, under insuring may result in lower premiums.  But beware.  It may also result in a larger out of pocket expense following a loss claim.  Coinsurance requires the homeowner insure the structure for an amount closer to the estimated replacement cost of their home and at the appropriate premium.  You should discuss the home’s replacement cost value with your insurance agent as every carrier is different.  Some may use their own internal estimator while others may use an outside provider.  If you’d like to get some idea for yourself, two of the more common estimating resources used by insurance carriers are Xactware’s 360 Value or MSB’s SwiftEstimator online.

Most policyholders purchase insurance with the intent of being fully covered following a loss. The simple and sad fact about these properties I was viewing, was that the previous homeowners didn’t have the appropriate amount of “Coverage A” on their policy and the settlement check they received from their carrier wasn’t enough to fully rebuild their home under the market conditions of that day.  These policyholders suffered great financial hardship by not purchasing the correct amount of insurance required under their coinsurance provision.  It is important that all policyholders know whether their policies contain a coinsurance clause and, if so, whether they have purchased the amount of insurance required to receive the full benefits they expect following a loss. Regular evaluations with your agent can ensure that property values, inflation and construction costs to name just a few, are taken into account within your insurance limits. An evaluation once every three years is a good rule of thumb, but may or may not be sufficient depending on the circumstances.

With recent severe weather trends, don’t wait to examine if your policy is fully ready to protect you and your interests.  If you’re uncertain whether your home is properly covered for just such an event, come by and let us help.

Google+Luis Roque is a local Independent Agent who strives to help you to “Be Protected, Not Surprised. Get More Than You’re Already Paying For.”
Roque Agency Insurance is located at…

150 Uptown Square, Suite C
Murfreesboro, TN 37129.

Or click here to call us at (615) 582-3382

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