Finance Quick Answers
I am concerned about what my insurance covers in case of a fire. What should I do?
Check with your home insurance company, as replacement costs are quickly disappearing. Major insurance companies are starting to withdraw their replacement-cost guarantees on homeowners policies which promised to pay the costs of rebuilding even if costs exceed face value of the policy. One of the nations largest homeowner’s insurers has eliminated its guarantee in half of the 50 states and has requests pending in most of the rest. Under the new plan, if you buy insurance to cover 100% of the agent's estimate of replacement costs, the company will pay only 120%, even if actual cost of rebuilding is higher. To be on the safe side, let your agent know of any remodeling you’ve done and have him assess it’s replacement cost. Or ask a contractor to evaluate the cost of a rebuild.
Source: Kiplingers, Managing Money, August 1998
Sandra McKinnon, Consumer & Family Economics Specialist, University of Missouri Extension
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Last update: Monday, July 28, 2008