Need to Know!
To be clear, the chance that you have a fire, or suffer a major water damage claim to your home during all the years of ownership, is not high. The chance is even lower if you are diligent about maintenance and repairs. But your primary residence is an important asset and choosing the right home insurance policy is an important step.
This is the “Need to Know”
Here is why!
First, there are essentially 2 types of home insurance policies. We refer to them as Basic and then Premium.
Basic is a package of coverages that includes standardized coverage that is supported in the policy with language to limit coverage. Premium has the same coverage but is more robust, with guarantees to fully compensate you for your loss.
We recently added a new client who has an active claim with an insurer, with a basic home insurance policy. Eight months ago, they had a minor fire, the original damage estimate was $400,000. The insurer suggested they could get the work done for $300,000. In the eight months the estimate has grown to $450,000, and work has yet to begin. Eight months of the family being displaced, living in a rental, with no progress. This is the “Need to Know”.
The insult to injury is that with a basic policy the insurer will process the payment based upon Actual Cash Value, which is a deduction for Depreciation. The hold back against replacement cost is only processed when the repairs are complete, and the claim is finalized. Unfortunately, that means as the insured, as in you, foot a large chunk of the bill of the full replacement cost until the claim is finally settled. How long that is we can only guess.
Again, it’s not likely that you will experience a major claim on your home, and you may be able to save on premiums. But this is one instance where paying more makes sense, especially when it comes to your home.
If you need details on basic vs premium drop an email to Kyle at firstname.lastname@example.org or call 203.698.9342