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Home Values Sink, Home Coverage Rises….Why?

April 22, 2009

 

Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

Since I’m somewhat new to the blog world, I sometimes find myself thinking about topics that can often times be repeated at nauseam in the FAQ sections of most insurance agency web sites. Possibly even our own! So I have tried to stay away from the rote insurance explanations that can be so boring -Washington’s current administration could possibly define them as some sort of torture. And, they might in fact be right. It is with that risk in mind (excuse the pun) that I would like to speak for a moment about the current housing crises and how it affects or doesn’t affect your needed amount of homeowner’s insurance coverage.

Here in Connecticut, we have been fortunate in that while our home values have dropped, we have not been hit quite as hard as other parts of the country. If you happen to live in an area of the state, or in a state where home values have taken a deep dive, customers often ask why the dwelling coverage on their home policies haven’t dropped accordingly. At this point in our economic crises, this is a very relevant question, especially as we try to pay closer attention to our finances.

The answer is quite simple. Insurance customers often confuse their home’s market value with their replacement  coverage amount. Home prices have dropped, but the cost to rebuild your home in the event of a total loss has really not dropped at all. In some cases, the price to rebuild your home has actually risen. You are insuring your home to the value of its replacement cost. In times like these, there are a substantial number of homes that the rebuild cost exceeds the market value. When the housing market is in a boom cycle, the reverse scenario can also be true. Your replacement amount may be well below your market value.

I know that there are lots of other free blogs that you could not be spending your money on, so thanks as always for not spending your hard earned money on mine!

Your humble risk manager,

Chris Garlasco

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