How Household Insurance Can Save Your Property From Total Loss


It is scary but it’s a reality — total property loss does happen and only household insurance with the right policy can save your home, your family’s refuge. In the past few months, earthquakes in Japan, New Zealand, Thailand and even California have occurred. Tsunamis and forest fires can lead to total property loss. It’s time you take a look and evaluate your household insurance. Make sure your household insurance is enough to cover you in case of disasters.

Cash Value Home Policy vs. Replacement Cost Policy

The simplest way to compare the difference between various household insurance policies is: Your home’s value in the market may be $250,000 but the total amount to rebuild your home is $350,000. Your home is, what is commonly known as underinsured. Makes a lot of sense, right? We understand that cost cutting during the current economic climate is important but we must be intelligent in choosing how we should cut costs. The premium for the former is so much cheaper than the latter. But it may prove to be more useful and cheaper in the long run. The primary reason is because the homeowner has to fill in the discrepancy in the amount between the cost of the house and cost to rebuild the house. You may wonder if there is a quick solution for this situation? Sure there is, here is the workaround

Never confuse yourself with the value of your home and the value to rebuild your home. The materials used and bought at the time your house was built was priced much lower in relation to today’s prevailing prices of materials.

Call your agent and discuss the following possibilities and how much it will increase your premium if any or all of the following policies would be added to your current policy:

a) Flood Insurance – Your policy may cover you from hurricanes, tornadoes, fires, storms but it will not cover you if your home was flooded because of a hurricane or tornado. Check with your agent you may have coverage for Flood Insurance. It is available through the federal government’s National Insurance Program (NFIP). Make sure to have coverage for both the structure and the contents of the house. Also do bear in mind when you add this to your policy there may be a 30-day holding period before your insurance goes into affect.

b) Replacement Cost – This covers for the replacement or repair of the damages in your property with the same or close to the same quality of construction and the exact kind of materials your home may have been built out of. Most household insurance policies include this, however it would not hurt to check.

c) Extended Replacement Cost – Policies have limits including Replacement Costs. Extending your coverage to 20% can cover your house in case the damage is more severe or a disaster caused the cost of materials to rise.

d) Water Back up – again this type of add on is standard on most household insurance policies. Again, there is no harm checking. Water back up covers you from any drainage or sewer damages.

e) Inflation Guard – this type of add on automatically adjusts to the changes in costs of your home construction materials. Most household insurance policies have this as well, but do check. This is usually added or paid separately from your household insurance premiums.

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