Underinsurance Can Spell Disaster For Homeowners

 


Visitors: 650

Insurance is meant to give homeowners peace of mind, but an increasing number of policy holders are putting themselves at risk by neglecting to insure their home and contents adequately.

There is often confusion over the difference between guaranteed and extended replacement value insurance. Guaranteed replacement means that if the home is destroyed or severely damaged, the insurance company will pay for it to be rebuilt, whatever the cost. This is the most secure form of insurance for the homeowner, as it literally means the home is guaranteed to be replaced, but the deal carries a degree of risk to the insurer. While this type of policy used to be standard, it is now becoming increasingly difficult to even find an offer of a guaranteed replacement policy. It is now more common to be offered an extended replacement value policy, which covers a percentage of the value of the home of up to one hundred percent, plus an added percentage towards building costs. A replacement value policy simply pays an agreed set amount if the property is destroyed or badly damaged.

Consumers should also take into account the depreciation in the value of their contents over time, and insure their replacement value, rather than their resale value. After all, if the items are lost or stolen, they will need to be replaced with new items, not second hand ones.

An important aspect of managing the policy in the long term is to keep it up to date. Some policies will have an inflation effect built in, so the insured amount will automatically rise each time the policy comes up for renewal. A professional valuation should still be done on the property regularly, so that the policy holder can renegotiate with the insurance provider if the level of coverage has fallen behind.

David Cannell is a freelance writer and university educator. He is also the owner of http://www.insurance-andmore.com

(330)
Tags:

Article Source:


 
Rate this Article: 
 
Are Secured Homeowners Loans Best For Homeowners?
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

2 EBook Publishing Mistakes That Can Spell Disaster

by: Ethan Evans (May 08, 2008) 
(Internet and Businesses Online/E Books)

Identity Theft on Your Credit Card Will Spell Disaster

by: Mario E Churchill (April 17, 2007) 
(Finance)

Trade Show Marketing Misery - 10 Deadly Mistakes That Spell Disaster!

by: Tim Warren (February 06, 2006) 
(Business/Top7 or 10 Tips)

Candlestick Stock Charts - Why an Upside Gap Two Crows Can Spell Disaster For ..

by: Doug Fisher (September 17, 2008) 
(Investing/Stocks)

Data Disaster Recovery and Disaster Planning

by: Gitesh Trivedi (December 10, 2012) 
(Computers and Technology/Software)

Homeowners Can Rest Assured About Cash Arrangements With Secured Loans For ..

by: Steve C Clark (June 24, 2008) 
(Finance/Loans)

Non Homeowners Reduce Burden: Opt Debt Consolidation for Non Homeowners

by: Steve C Clark (November 10, 2006) 
(Finance)

The "Disaster Dozen" Top Twelve Myths of Disaster Preparedness

by: Paul Purcell (October 15, 2005) 
(Home and Family)

Is Your Business Disaster Ready? 10 Ways to Prepare Your Business For Any ..

by: Amelia Brazell (September 16, 2008) 
(Business/Continuity Disaster Recovery)

Are Secured Homeowners Loans Best For Homeowners?

by: Erika Anaya (July 10, 2007) 
(Finance/Loans)