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Why is my Dwelling Coverage higher than the Value of my Home?

Posted on October 12 2012

I hear this all the time. "My coverage A is $250,000, I could't sell my house for half that!"

I know. You're absolutely correct. The difference in the coverage on my home compared to what the house would sell for right now is about $30K! The market is down and the cost of Buidling materials is up.

I just read an article on the Kipinger's Personal Finance site that indicated since the Housing market peaked, the median home price is down 35% while the cost to rebuild a home has increased 40% since 2004! This increase is due to rising building-material and fuel costs. Couple this with the fact that the national average insurance premium for homeowners will increase 5% this year.

So what's the good news?

Well we all know the housing market will evenutally come back up. If you can refinance, do it now before the rates go back up.

It seems like the increased homeowners premiums are here to stay. I would advise shopping around. Is your home and auto policies "bundled" together? If not, you should definitely ask auto carrier for a quote. Do this even if you are happy with the homeowners premium.

You should also ask your agent to make sure the coverage for your Dwelling is not too high. Each year every carrier will automatically increase the rates to keep up with rising costs and inflation. If your home wsa built after 1930, there is a decent hance you can lower your coverage A.

What is your deductible? If you are handy at all, you may want to increase it. Recently my wife and I had our first claim. Unfortunately it happened 2 months after we raised our deductible from $250 to $1000. Ugh! But we are still going to come out about even becasue my father in law is handy. We can do the painting as well as the removal and replacement of ceiling tiles in the basement. The Insurance companies will pay for a professional to do this work.

Homeowners renewals typically arrive in your agent's office about 2 months in advance. When you receive your copy, call them and ask for a review. Mention the ideas above. If you are not incredibly loyal with your agent then shop around. But make sure that you go with someone you trust!

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