Do you have the right Homeowners Insurance coverage?

Let's talk about your homeowners insurance. As a roof inspection company all too often we meet people who just do not have enough coverage when a catastrophe hits. Your homeowners insurance is something you just don't think about, until you need it. 

I bring this up, because recently I received a notice that my mortgage payment was going up to cover the increased cost of my 'hazard insurance'. Hazard insurance? What is that?

Apparently Hazard insurance is NOT the same as homeowners insurance. 

Hazard insurance covers my home from just that, hazards; things like fire, flood, hail, or vandalism. Now hazard insurance can cover more, so it seems I need to find out from my agent exactly what kind of coverage I have. 

Another issue people face is what kind of coverage they have. Most policies are for Actual Cash Value, (ACV), which are less expensive to the insured, (you the homeowner) and preferred by your insurer, (your insurance company).  Whereas a Replacement Cost Value, (RCV), policy costs more it also covers more. 

What is ACV? Well that is the actual cash value of the specific item, less depreciation. Perfect example, we all know that as soon as you buy a new car, it is worth 3k to 5k less as soon as you drive it off the car lot. Well that is depreciation! Just like a car, the roof on your home depreciates.  The insurance company may value your roof at $10,000, minus depreciation you could conceivably only receive 40% to 60% of that amount, plus your deductible is subtracted as well.

Obviously, the older something is, the less value it has, so ACV = replacement cost - depreciation. Every insurance company has its own formula for depreciation.

RCV is the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose.  So if you have a roof that will cost $10,000 to replace, your insurance company is responsible for the entire cost, minus your deductible. 

Some policies have different deductibles for regular coverage and catastrophe coverage. For instance, my policy has a regular deductible of $500, but for hail or wind damage to my roof, the deductible is $1000.  That might save me a few bucks a year, but if I don't have a $1000 than I can't get my roof fixed.  

(We'll cover scammers offering to pay your deductible next week)

Another coverage people often do without; code upgrades.  In the last few years many of Colorado municipalities have re-written their building codes. What does that mean for you? If your roof does not have metal at the eaves and rakes and it is required by building code; the roofer must install it and you must pay for it. There are more code upgrades and all of them will increase the cost of your roof repair or replacement. 

The economy has made it tough, many folks have chosen to reduce their monthly homeowners insurance by reducing their coverage not understanding exactly what it will mean in the long run. 

Talk to your agent and have them explain what coverage you have and how it will affect you should a catastrophe occur.