Is Your Home Insurance Too High?

is-your-home-insurance-too-high-nyYou’re not the first person to look at their insurance policy and realize that your property’s insured value is too high. In fact, two out of three homes in the US are underinsured, yet there are still plenty of people who believe they’ve over insured their home. We’re not saying this may not be the case, but the only real way of finding that out is by reviewing the value listed on your policy (usually called Dwelling limit or Coverage A) on a yearly basis. This way, you’ll be able to know whether your home is properly insured.

On the other hand, there are also cases when you may find that your insurance is too low. In this case, you can easily adjust your policy or use endorsement to add extra coverage.

One of the main issues with insurance though is when your property’s value increases so much that you quickly find yourself in a situation where your home is over insured. Luckily, there are quite a few things you can do if you don’t agree with the estimated reconstruction cost of your home or its insured value.

Check to see whether you’re over insuring your property

When people make large claims, one of the main issues they’re going to deal with is finding out their home is underinsured. Even so, when people check the cost of their home insurance, they often want to reduce costs as much as possible. New buyers are often surprised to find out just how much they need to pay to insure their home, while people who’ve had a home for a long time may feel quite annoyed to see that their property’s insurance value has increased, while its resale value may not have followed the same trend.

Prior to lowering your property’s insurance, there may be a few other factors that can help you in this regard. For instance, you may be able to take advantage of various discounts that can be added to the insurance policy. Other options may also be available, such as getting a new security system or increasing your deductible or lowering your personal property coverage.

If you don’t agree with the value the insurer wants you to insure your property for, rest assured, since there are always options you can consider.
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Top 3 ways your property insurance dwelling value can go up

Prior to letting you know exactly why your property’s value may be too high and what can be done about it, it’s important to understand why this happened in the first place.

There are 3 factors that may influence this increase, including:

  • You’ve had an evaluator visit you for an insurance property inspection. After checking the cost of reconstruction, he recommended your insurer increases your property’s value.
  • There may be a clause in your home insurance policy that’s meant to protect you from the costs of inflation. This clause may also increase the value of your property insurance on a yearly basis, yet only by a small percentage. However, in the long run, this inflation can become pretty substantial and eventually force you to review your property value for accuracy.
  • You’re the proud owner of a new property that’s going to be insured for the very first time. In order to check its value, the insurance broker or agent used basic tools and info you’ve provided them to determine the home’s insurance value.

Things you can do if you don’t agree with your property’s insurance value

A lot of people believe that the insurance value set by an agent or broker is final, but that’s not true. There are many cases when this type of evaluation can be erroneous. Luckily, there are a few ways you can check whether your property is over insured. The main reason people get insurance is to protect their assets, so if you think that something is indeed off, then you have every right to investigate and get an answer. Therefore, don’t be afraid to call your insurance agent and request a review or ask questions.

Usually, if you have a solid and legitimate case, the insurance agent or broker will submit your request for review to the insurance underwriter.

Have inflation adjustments caused your property’s value to increase?

Inflation clauses are put in place by insurers to protect their clients when they insure their property. The reason for this is simple: if a homeowner insures his home for a certain dollar amount and after several years he files a claim, he won’t have to worry about coming up short on the dollar amount required to rebuild his home from increased cost of construction. The inflation clause is intended to keep up with increased cost of construction over a period of time.

The bad news about this method’s accuracy is that it depends on the homeowner’s foresight, specifically him insuring his property for the right replacement cost at the time of writing the policy. If the numbers are off in the beginning they will continue to be off in the future- and sometimes by a significant amount.

When it comes to standard inflation that happens over a long period of time, insurers recommend that homeowners use current reconstruction rates to re-evaluate the value of their property. You should speak to your insurance representative about your home’s value and review the dwelling coverage every few years for accuracy. Getting a readjustment can in many cases be as simple as making a call and talking to an agent.

Effectively negotiate by using these simple tips when your property’s value is increased

If you’ve discussed with your insurance representative about the increase and the results are not what you were hoping for, then rest assured. There are 3 very simple approaches you can consider negotiating with your insurers.

3 simple methods to get a second opinion on your property’s insurance value

One of the first things you can do is ask your insurer to recheck their calculations. You should specifically check the square footage they’ve used and then compare those numbers with the standard in your area (based on info from local builders). If you find that your numbers are off, show those numbers to your agent and ask them to have an underwriter make an adjustment to your policy. In many cases they’ll offer you a different solution or a compromise.

Get in touch with one or more insurers and request that they estimate the cost of having your property reconstruction and have them send you a quote. If their cost is different, be sure to ask why, especially if the info you’ve provided them for this purpose is identical to the info you provided your insurer. Make sure they also used the same rating tools as your insurer.

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Another thing you could do is get in touch with a private appraiser who is accepted by most insurers. It’s important to do a bit of research in this regard and only hire someone that is accepted by your insurance company. Wasting money on this and finding out your insurer doesn’t accept the independent investigator’s review is not the goal. The methods and tools used by the independent appraiser must also be approved by the insurance company. You should know that in the majority of cases, independent appraisers are a bit more accurate and their appraisal amounts may be higher. It’s true that the appraisal value may be lower in some cases, but this happens quite rarely. Before hiring an appraiser, you need to inform them of the previous appraisals you’ve got, including the cost per sq. ft. used by your insurer. If the appraiser is well reputed and experienced, he’ll tell you right away if your values are within the normal range and may even help you save some time and money in the process.

Check your home insurance policy type and coverage requirements. In most cases, insurers provide many types of insurance coverage for properties.

What you need to know about home value and guaranteed replacement cost

Guaranteed replacement cost will effectively insure your property to replacement value, including a certain percentage over the value of your insured property in the event the reconstruction cost may go over the policy limit after making a claim. Depending on the company used, some of them may put a cap on the value to 125% of the insured property’s value. However, there are also companies that may provide a guaranteed replacement regardless of the cost. To know which insurance type to get, it’s advised that you speak to your insurance representative about it. If you opt for guaranteed replacement coverage, then you need to insure 100% of your property’s evaluated reconstruction cost at the time the policy was written. This coverage is the best by far since it fully protects your home regardless of what happens to it. Still, there are a few other options out there that provide great coverage at a much lower cost.

What you should know about replacement cost

Replacement cost is a bit different compared to guaranteed replacement cost. The difference lies in the fact that you’re only going to be protected up to the property’s insured value and no more. If you believe your home insurance dwelling evaluation is incorrect and you deem that a lesser insurance amount is better suited for your property should you file a claim in the near future, then you need to get in touch with your insurer. This way, you can talk to them about lowering your insurance cot by getting a replacement cost insurance policy instead.

To benefit from replacement cost, you need to insure your property to a certain percentage of its value. Depending on the insurance company used, you’ll find that most of them offer different plans that vary in requirement to insure to eight or up to eighty five percent of your property’s reconstruction value. Jurisdiction also impacts your insurance policy and cost, so you need to speak to your insurance company about this as well. By doing so you may very well avoid the argument regarding whether the value is valid. If you’re comfortable taking your chances, then this can provide you with a safe middle ground.

How reducing or increasing dwelling value affects your insurance coverage

A wide range of the coverage found in a homeowners’ insurance policy are provided as a percentage of the insured property value. For instance, your personal contents and belongings may have been insured at about 70% of the property’s value and your extra living expenses may be set at 10% or 20%. Each time your insured property’s value changes, it’s important that you verify how this will influence the rest of the coverage you’ve got. There are cases when the value of the items in your home could be a lot higher than the items of the average individual. Under these circumstances, it’s important that you exercise care when changing your property’s value and that’s because this will impact the rest of the related insurance amounts for:

  • Extra and detached structures— (Other Structures/Coverage B)
  • Personal contents— (Personal Property/Coverage C)
  • Extra living expenses— (Additional Living Expenses/Loss of Use/Coverage D)

Cutting down on your property’s insurance value won’t affect your home policy’s liability coverage, special endorsements, riders, or any special limits the policy may contain.
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What other options do I have to save on insurance costs?

If you’ve properly evaluated the reasons why your property insurance costs are so high and you are still adamant on saving money, there are ways you can do that.

First, you may want to get in touch with your insurer to increase your deductible. In turn, this will help you save a lot on insurance costs (usually about 40%).

Bundling your insurance is also recommended. Get in touch with the insurance company you currently use and ask them to provide you a quote for your car and home insurance.

Getting in touch with other insurance companies is also recommended because costs vary greatly. Many people may also worry about getting hit with an early cancellation penalty should they decide to cancel their policy prior to the renewal date. However, what many folks don’t realize is that in that most insurance policies are written on a Pro-Rata basis (daily rate) and any unearned premium will be refunded by the insurance company—even if you cancel your policy mid-term.

Written by David Clausen

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7 Important Steps to Filing a Successful Homeowners Insurance Claim

How Do I Go About Filing My Claim?

Homeowner Insurace DeductablesAny peril which is covered under an insurance policy that occurs in your home, has to be paid out by your insurer; but the first step is the claim filing process. The first step to take is to notify your agent in writing, at the first possible moment. A policy is a contract which is binding between you and your insurer; this means there are rules in place you have to follow, but also rules they have to follow if an accident does take place. It is also important to read and fully understand the policy, to ensure you know what is and isn’t covered.

So, here’s what happens when filing your claim:

1. Report theft, burglary, or other forms of thievery which occurs in your home to the police. Make sure a full police report is filed and you have a written copy; also make sure you take down all law enforcement names and police you speak to, in order to have everything properly filed and documented.

2. A time limit is in place for filing your claim, each insurer’s time limit varies. Ask the right questions and find out how long you have to file that claim. Find out: If you are covered, whether or not you have a deductible, how to get estimates for damage, and how long the claims process typically takes. All information is pertinent when filing your claim, and is the only way to ensure things will move along as they should.

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3. Reasonably take all steps and precautions you can take to prevent further damage from ensuing. If you spend any money in doing so, save all receipts and submit these along with your claim, to the insurance agent who is going to file it on your behalf.

4. You also have to substantiate your losses during this time. This means keeping damaged items in the home until an adjuster visits and determines their value. It is also a good idea to take photos and videos of the damage, so you can document what has occurred in the home. A home inventory list of belongings (before and after the claim) should be taken and submitted when you are speaking with adjusters and of course your insurance agent. This is to make sure everything will be replaced, and you won’t have to pay money where you shouldn’t be paying for items which are covered by your policy.

5. In some cases, where extreme damage occurs, you might have to leave your home. If you have to stay with family or in a hotel, keep track of all costs you incur. From cost of the room, to food and dining out if you can’t eat from the comfort of your home. If you have “loss of use of your home,” most insurers do reimburse you for those costs (at least to a certain extent) but only if you have maintained all logs and keep receipts, which are dated, for the monies you spent while you are out of your home.


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Keep in mind if a mandatory evacuation from the home is required, most policies and insurers do not provide reimbursement for those costs. So again, familiarize yourself with the policy terms, and make sure you know what is covered, and which costs you are not going to be reimbursed for after an accident and a policy claim have been filed with your insurance provider.

6. After notice of the claim, your insurer is required to send you all claim forms within a certain window or period of time. Every state has different regulations in place, so the time frame can vary from one filed claim to the next. In order to avoid delays in processing, it is important to file the claim and fill out all paperwork as soon as you get it. Also make sure things are legible, you include all addendum, and that you make it as easy as possible for the claim adjuster to find the information they need, so they do not continually call you or try to delay the process when you need the claim to be filed in a short turn around period of time.

7. At this point your insurer will probably call an adjuster who will come to the home to do an inspection; and they will determine if it is in line with what you have reported and filed in your original claim. As they compile information, make sure you comply with requests and that you are as cooperative as possible, as this will speed the process along, and is the only way to ensure all of the costs are reimbursed when damage has to be repaired. Although the adjuster can’t approve your claim, the insurer will use the information they provide in determining what will be paid for. So you want to make sure the adjuster’s notes are as detailed as possible, meaning you have to answer questions, provide all information they require, and you have to be honest during the process, in order to ensure your claim goes through as quickly as possible, and is approved by the insurer as quickly as possible as well.

State laws are in place to make sure you receive your payment quickly after you and your insurance provider come to terms and to an agreement. If you are settling on the claim, the insurer is going to present an offer, and you have the right to counter or discuss in further details, the actual costs. Once all terms have been agreed upon, every state has regulations and laws in place, which require your insurance company to cut you a check within a certain period of time.

More often than not these claims are filed quickly with most insurance companies. The state department can answer certain questions about the claim process. If you have any questions about filing the claim or when you will receive your check, this is best to discuss with an insurance agent to make sure the process goes as smoothly as possible, and you receive payment as quickly as possible when a settlement has been agreed upon.


Questions? Call us at 631-782-3175

For more information and helpful video’s explaining everything from, how to save money on Homeowners Insurance to an easy explanation of Flood Insurance, be sure to visit the Coastal Insurance Video Library.


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