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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