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Is my house insured for too much?

March 16, 2011
By KEVIN SCHUMAN, Ask Your Insurance Agent

Question: My home is insured for $280,000. I have argued with my agent that it is too high. I could only sell it for about $150,000 and am being taxed at about that amount. Is there anything that I can do?

- Joseph A.

Answer: Thanks Joseph for that question. The fall in the real estate market has left many people with a situation like yours. Unlike market value, taxable value or even your purchase price, the homeowner's valuation is for rebuilding your home. Each insurance company has a rebuilding estimate based on square footage and the features on your home.

If there was a major loss, the coverage should be enough to remove the debris and rebuild to current building codes. Since those codes have changed many times, that alone could add many thousand of dollars to the cost.

One other factor is when the property would be destroyed. A home that burns down on a "sunny day" in January would have contractors falling over each other to bid. On the other hand, we can well remember Hurricane Charlie and the havoc it caused. The sky was the limit on repair bills, if you could get someone to even look at your property.

Some insurance carriers will allow a certified appraisal of the home in lieu of their rebuilding estimate. Keep in mind this will still seek to be the rebuilding not depreciated amount.

Other cost cutting ideas

Since the value you are insured for is just part of the premium make-up, there are other ways to reduce premium.

Deductibles of $2,500 or $5,000 may save up to several hundred dollars. Be sure your mortgage company will accept this.

Look into a windstorm loss mitigation inspection. Newer or hip roof shutters, straps can all be premium savings. Be sure that you are not over insured for personal property or additional structures.

Shop rates! Some companies do not want all the business they have on the books. if they raise the rates, they will have some customers leave.

Kevin Schuman is a senior Allstate agent. He can be contacted at 239-945-8888 or toll free at 800-356-2153.



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