Risk & Business Magazine Marcotte Magazine Fall 2017 | Page 25

HOMEOWNERS POLICY
BY: BECKY GILMORE
PERSONAL INSURANCE
Buying the Right Homeowners Policy
Issues You May Face
T
he Great Recession of
2008–2009 wreaked havoc
on homeowners who didn’t
have the right type of
insurance coverage. Simply
stated, those that were insured to market
value were often out-of-luck if their homes
were damaged or destroyed during this
deflationary period. In this harsh economic
climate, the market values of many homes
had depreciated so severely that a “market
value” reimbursement rate was not nearly
enough to help homeowners rebuild their
homes to their previous conditions. In
these cases, not only did many of these
individuals face devastating emotional
losses and inconveniences but they were
also severely impacted financially.
Although home prices have strongly
rebounded over the past few years, it’s still
important to keep this lesson in mind: your
home’s market value—what it might sell for
in today’s real estate market—may not even
come close to the actual cost of replacing
your home to the same condition it was in
before it became damaged or destroyed.
Market value is based on factors such as
your neighborhood’s school systems and
desirability versus other neighborhoods as
well as access to transportation, amenities
and cultural institutions. The unique costs
required to actually rebuild your home
are not even part of the equation, and the
elements that are considered can vary
widely, depending on market conditions.
There is a long list of reasons why the math
doesn’t add up when it comes to market
value versus replacement value. Here are
some of the major issues you might face in
restoring a damaged or destroyed home:
1. The materials used to construct
your home—particularly if it is older or
historic—may not be readily available any
more. Even if they are sourced, it may be
very expensive to purchase and transport
the small amounts needed for just one
house.
2. Your home may require a specialized
type of craftsperson—such as a mason or
glazier—who is expensive and difficult to
find. You may have to spend additional
time and money waiting for these
individuals to become available to work on
your home.
3. There may be new environmental
regulations in place to protect against
extreme weather conditions that can
increase the costs of materials, compliance
or disposal. Building according to more
“green” standards could also require
additional building inspections and other
red tape.
4. You may encounter new costs for
professionals like architects, designers
and landscapers to restore or modify your
home’s design or structure.
Because of these considerations, it’s
important to work with an experienced
broker who understands the nuances
of insuring your home. In addition
to market versus replacement value
provisions, insurance policies can
vary widely with respect to premiums,
coverage details, deductibles and other
factors. The cost of insurance can also
be affected by the presence of a hazard
such as a swimming pool or trampoline,
your credit score, the condition and
maintenance of your home, and your
home’s weather preparedness. It’s best
to work with your broker to review all
of the risk considerations relevant to
your home, and be sure to ask a lot of
questions to determine how to maximize
coverage at a rate that you can afford. +
Becky Gilmore works in Marcotte’s
Personal Insurance division. She
specializes in customer detail and
reviewing coverages with clients. Becky
joined the agency in 1997 and brought
25 years of insurance knowledge and
management experience with her. She
has obtained her specialty insurance
designation of Certified Professional
Insurance Woman (CPIW) and Certified
Insurance Counselor (CIC). She can be
reached at 402-970-3316
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