You Can't Judge a House by its Market Value

The Henrys purchased their 2005 custom built home for $195,000.

Their insurance agent had their Replacement Cost Coverage (the amount

it would take to rebuild their home to its previous like kind and quality) at

$195,000 when the Henrys closed on their home.

SHOCK NUMBER ONE

Four years later they decided to downsize and buy something “more

affordable.” Their realtor appraised their home and due to current market

conditions, regrettably explained their house should be listed at $180,000.

SHOCK NUMBER TWO

With their realtor’s appraisal in hand, they headed to their local Germania

agent’s office. After reviewing their paperwork and plugging in data

through his residential construction cost estimating software, the Henrys

received an even bigger shock. They were underinsured by 20 percent!


MARKET VALUE IS NOT WHAT IT WOULD COST TO REBUILD

 YOUR HOME

“This is one of the most common, yet poorly communicated issues in

the insurance industry,” said AVP of Underwriting, Mike Kroll.

Even though the “market value” of their home had dropped considerably, due

to rising construction prices (roofing materials have increased by over 50

percent in 2008* alone) it would cost the Henrys roughly $234,000 to

rebuild their home in the same spot with the original materials used to

construct their home in 2005.

STILL SHOCKED…BUT ENLIGHTENED

Like millions of Texans around the state, most find insurance confusing

and do not understand its true purpose — to protect your home, its contents

and make your house “whole” again in the event of a loss.

REALLY?

The Henrys aren’t alone. Roughly 50 to 70 percent of Texas homeowners are

underinsured.

“It’s unfortunate that most people don’t realize they’re underinsured until

disaster strikes,” said Germania’s AVP of Claims, Russell Hill. It’s important to

revisit the amount of insurance coverage you have on your home annually.

GET PROACTIVE

A great way to get the ball rolling? Contact your agent to discuss what your

current coverage is — and ultimately — does it reflect the cost to rebuild your

home should the unthinkable happen.

As one of your most sizable assets, it’s worth the call.


Factors That Determine What It Would Cost to Rebuild Your Home


If you’re like most people, the concept of how much it would cost to rebuild

your home to its original grandeur is difficult to formulate. Your Germania

agent is equipped with the tools necessary to evaluate your home’s unique

features and take current construction costs into account, based on where

your home is located.

FROM SIMPLE TO UNIQUE

Replacement Cost Coverage, the cost to rebuild or repair your home to its

original state with materials of like kind and quality (without a reduction for

depreciaition) changes each year.

For example, your agent can assist you with determining the replacement

cost of your home based on its unique features by using industry-standard

software to estimate how much coverage you should obtain to protect your

home against perils such as fire, hail, lightning, etc.

Construction classifications are designed to take into account innumerable

options that would make the most avid fan of the Home & Garden Network

recoil in surprise.

ROOFING MATERIALS: 24 choices* of

materials that can increase — or decrease — the

amount of coverage you need on your home.

EXTERIOR WALL MATERIALS: 44 unique

items* are taken into account — including vinyl

siding, hardboard siding, stucco, brick veneer and

the more costly Austin stone veneer.

FLOORING: 26 different styles* of flooring

options from less expensive (carpet) to very

expensive (marble).

Not All Homes Are Created Equally !

Discussing your home’s interior/exterior features with your agent is imperative

if you want to make sure your home is insured for the correct amount a.k.a

“Insurance-to-Value.”

It is important to communicate with your Germania agent if any significant

remodeling has been done, as your agent can update your policy so that the

proper coverage is adequately reflected.


* Source: MSB Residential Construction Cost Changes

* Using Marshall & Swift / Boeckh (MSB) ITV Property Index benchmark


WHY POLICYHOLDERS ARE MISGUIDED IN THINKING


“THAT WILL NEVER HAPPEN TO ME”

As far as Mother Nature’s fury is concerned, Texas takes

the cake as one of the most topographically diverse and

disaster prone states in our country. With over 32,000

recorded hail events over the past 30 years* (Florida

has recorded 3,713 hail events over the same span

of time) coupled with over 20,000 thunderstorms, 6,238

tornadoes and 8,533 floods occurring throughout all

regions of the Lone Star state – suffice it to say that no one

and no structure is safe.

*Source: National Climatic Data Center
 
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