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Preparing for a Fire Threat: Insurance

Preparing for a Fire Threat: Insurance

We’ve all seen the incredible and horrifying pictures of the devastation from the Camp and Woolsey fires in California over the recent weeks. Whole towns demolished. Property damage estimates are expected to exceed $19 billion for homes and businesses. The amount of uninsured or underinsured losses has not yet been calculated, but it is sure to be some portion of that amount. How could those home and business owners have better protected themselves with insurance? How could you better protect your home and business? First Things First If there is a fire bearing down on your area at this time, you cannot purchase new coverage or  make changes to any of your property or auto insurance policies. Insurance companies will put moratoriums on binding new policies or making changes to existing policies in the face of imminent threat of property damage. Call your broker after the threat has passed to discuss purchasing new coverage or making changes to existing coverage. Properly Insuring Your Property How much is your property worth? It’s an interesting question that has more than one answer. There is, of course, sentimental value. Unfortunately, that cannot be insured. Then there is market value, which fluctuates over time. Your expensive home or business can increase in value in times of economic upturn, but can decrease in times of peril, such as an oncoming fire. While this is a good starting point for insuring a home it does not accurately reflect how much coverage you may need in the event of a covered cause of loss. Replacement cost value is what property insurance policies are based on. Depending...
California Governor Signs Insurance Bill

California Governor Signs Insurance Bill

On August 30, 2018, California Governor Jerry Brown signed a bill designed to protect homeowners. This bill requires personal lines insurance companies to perform a replacement cost calculation for homeowners every other year. This bill was prompted by a large number of underinsured homeowners who experienced losses in the recent wildfires. These underinsured homeowners found themselves unable to replace their homes with the checks they received from their insurance companies. What Is A Replacement Cost Estimate? Your home can have many values: Market Value: this is the amount that the home would sell for if it was put up for sale in its current condition. This value is based on other homes in the area, and may fluctuate with the economy or increase with increased demand for homes in a particular area. Actual Cash Value: this is the amount it would cost to replace your home with similar quality and materials less depreciation based on the age and condition of the home. Replacement Cost Value: this is the amount that it would cost to replace your home with similar quality and materials in its current location to bring your family whole again. The condition is not a factor. This amount may be more or less than the Market Value. When insuring, you should always insure for the Replacement Cost, since this is the amount that it will take to rebuild the home at the time of the loss. A replacement cost estimate is a valuation calculator that uses the size, building materials, location and age of your home to estimate how much it would cost to replace the home...
Replacement Cost vs Actual Cash Value

Replacement Cost vs Actual Cash Value

The best way to be a better consumer of insurance products is to know what your are buying. Insurance terminology may seem vague and/or confusing, and it might be easier to just sign on the dotted line, pay your premium and get on with your life. However, those vague or confusing terms can have a huge impact on how your claim is paid, and what you are able to accomplish with your claim payment after a loss. Two such terms in property insurance are replacement cost and actual cash value. What Is Replacement Cost? Most property policies today are written on a replacement cost basis. Replacement cost is defined as the amount needed to replace an item with like kind and quality without deduction for depreciation. In terms of structure replacement, often the cost to replace an older structure with one of like kind and quality in today’s market would cost more than it did when the structure was built. Labor costs are higher, materials typically cost more, and a new structure may be required to have features that were not required when the original structure was built (an excellent reason to have ordinance or law coverage). For replacement of business or personal property, replacement cost value can be all over the map. An older electronic item may be replaced with like kind or quality for a fraction of the original cost. Some artwork and antiques may increase in value over time. What replacement cost does: replaces the item with like kind or quality up to the face value of the policy. What replacement cost does not do: the...