Wednesday, March 23, 2011

Under Insured Homes

A home is probably the biggest investment you will make. And with all the risks that surround us – both natural and man-made – no one knowingly under insures their homes. But when disaster strikes, that is the situation a large number of Californians find themselves in. In 2008, a survey found that 75% of the homes in San Diego and San Bernardino counties were under insured. Think of a worst case scenario where your home is destroyed by wildfire and you find the house rebuilding cost is $250,000 more than the insured value. Would you be able to go to the bank and withdraw that sum from your checking account?

The main cause of this problem lies a lack of clarity of the insurance options available. A homeowner gets his house valued and then looks for a home insurance policy that will cover that amount. This is what is known as cash-value insurance coverage. But when the time comes to make a claim, these cash-value insurance policies deduct the structure’s physical depreciation from the eligible repair cost. If the house is destroyed, these policies limit payments to the fair market value at the time the destruction occurred – the rebuilding costs are not taken into account. There are other policy restrictions that further limit the quantum of insurance coverage.

Although no one wants to spend more on home insurance than they need to, replacement-cost home insurance, which may be more expensive, is a far safer option. This will pay for the cost of rebuilding your home, irrespective of the fair market value. Even here there are different types of coverage to choose from. Why risk making a mistake that could affect your future? Why not contact Allied Brokers and make use of the expertise we have gained in our over 50 years of providing the highest levels of insurance services to Bay Area residents? We’ll clearly spell out the options you have, explain the pros and cons of each and help (but never coerce) you into making the right choice. All it takes make sure you and your home are fully protected is a phone call to (650) 328-1000, an email to or using the free rate quote service available on our website.

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