How to spot a cut-rate Home Insurance policy

Many Floridians have purchased cut-rate Home Insurance.
Are you one of them?

The reason quality Home Insurance costs more...Proper Protection!
5 ways to know if you have purchased cut-rate Home Insurance:

1) Check the Home Insurance policy form:

A review of your Home Insurance policy can find out if your Home has a quality policy, or a cut-rate policy.  Check the policy form used by the insurance carrier.  A standard policy for single family, owner occupied home, is written on form HO-3.  A preferred risk policy is written by some carriers under form HO-5.  But, if you see form HO-1, HO-2, HO-8, or form DP-1, DP-2 or DP-3, you may be incorrectly covered, or underinsured with a cut-rate policy.  Condos and other forms of dwelling where an association provides insurance coverage on the building, should be insured under form HO-6.  Those who rent their home have a renters policy form HO-4.  If you can't find the policy form, don't worry...We can help you in a review of your policy.

2) Take a look at the Home Insurance policy limits:

Section I of the Home Insurance policy has four coverage areas labeled A, B, C and D.  Coverage A is coverage on your Home's Building.  This should be an amount adequate to replace the building in a total loss.  The other three areas are typically set to fixed percentages of coverage A.  In a standard Home Insurance policy, coverage B gives 10% of coverage A for Other Structures.  Coverage C gives 50% of Coverage A for your Personal Property (Contents) of your home.  Coverage D gives 20% of Coverage A for Loss of Use of your home should you be required to relocate while your home is repaired.  If standard percentages are not being used on your policy, it may in fact be a cut-rate policy.  In Section II of the policy, coverage E is for Personal Liability coverage.  If you have less than $300,000 listed on Coverage E, your policy is probably Cut-Rate.  If you have assets to protect in excess of $300,000 such as Real Estate, Stocks, Bonds, Cash in Banks, etc., an Umbrella policy would also be recommended.  Folks insured with Citizens Property Insurance Corporation have a maximum of $100,000 in Liability Coverage.  We recommend the immediate purchase of an umbrella policy that covers amounts over $100,000.  As a homeowner, $100,000 in liability coverage is normally inadequate to protect the equity of the property, plus the value of all other assets of a homeowner.

3) Check for Replacement Cost Coverage:

Another cut-rate indicator is removal of Replacement Cost Coverage from your Personal Property (Coverage C).  Unless you have form HO-5, Replacement Cost Coverage must be added to your policy at an increased cost.  While optional, Replacement Cost Coverage is VITAL protection.  While normally included on the building in form HO-3, Replacement Cost Coverage can be omitted by inexperience, or by an insurance agent looking to win your business by offering a lower price.  Without Replacement Cost Coverage, the carrier will calculate losses based on the replacement cost of each item, less the accumulated depreciation since purchase.  This method of valuation is known as Actual Cash Value (ACV).  For example, a couch that cost $2,500 twenty years ago.  The depreciation on a twenty year old couch is 100% of the value.  So, unless you've opted for the Replacement Cost Coverage, instead of a new couch you would receive the ACV of the couch, nothing.  Insurance carriers have started inserting roof replacement endorsements that provide ACV (not Replacement Cost) coverage on the roof system itself, or use a sliding scale of replacement % that reduces coverage each year since the roofing system installation. For example, if you have a shingle roof with an expected lifespan of 20 years, such an endorsement may reduce the amount the insurance will pay towards the replacement of your roof by 5% each year until the roof is 20 years old, at which point, there would be no remaining coverage on the roof system.  Replacement Cost Coverage pays to replace all your items, up to the limit of your Coverage.  This is the most widely removed coverage on cut-rate policies.  Folks with cut-rate policies usually find out about this omission after suffering a loss, when they fail to recover financially.  We can easily identify this important missing coverage in a free, no obligation review of your policy.  Act before you suffer a loss and find out the hard way that you're not covered as well as you may think.  There's a reason cut rate coverage is less expensive.  Quality coverage does cost more.

4) Look for other important coverage on the policy:

In the declarations, you'll find other valuable endorsements to your policy at an extra cost.  While these items are not part of the basic policy, some of them are also VITAL parts of a policy that protects you properly and are frequently omitted in cut-rate coverage.  Three of these important endorsements are Water and Sewer Backup Coverage, Sinkhole Coverage, and Law and Ordinance Coverage.  Some policies are sold without this coverage and require a "buy back" of the coverage to protect you properly.  Not included on most Home policies, usually some degree of Water and Sewer backup coverage can be purchased.  It's usually not until a claim that most cut-rate policy holders find out this important coverage was excluded to save premium.  Sinkholes are a naturally occurring phenomenon in Florida.  Insurance carriers are no longer required to provide this coverage automatically, and many exclude Sinkhole coverage unless it's specifically requested.  Imagine your surprise to find a sinkhole opening up on your property, only to find your cut-rate policy doesn't cover this financially devastating event.  Law & Ordinance coverage is also VITAL protection, yet excluded on cut-rate policies.  This protects you from the replacement of undamaged portions of your home, that are required to be replaced by government Law or Ordinance.  For example, loss to 40% of your home's windows requires the other 60% be retrofitted.  A Home Insurance policy does not cover loss to undamaged windows, but the law requires you to replace them, the cut-rate policy provides no coverage, while a policy with Law & Ordinance Coverage does.

5)  Your Home Insurance costs far less than your neighbors.

Every Home Insurance policy has a different price, but similar coverage should not vary by more than 5-10%.  If you are paying far less than those in your neighborhood for similar coverage, be on the lookout that your policy is cut-rate.  All Home Insurance policies are supposed to give similar protection, the only way to pay less is to cut the coverage.   But, at claim time what have you lost by purchasing cut-rate coverage?  Tens of thousands of dollars in claim payments, just to save a few hundred on premium.  Complete protection comes at a cost.  Skimping on Home Insurance is NOT recommended.  A cut-rate policy should be avoided at any cost.  Cut rate policies can move through an entire neighborhood, as many neighbors are quick to let their friends know about seemingly cheaper insurance rates, but the truth is all policies that provide less coverage will cost less than those with total protection.  Many inadvertently take advantage of these cut-rate policies without the knowledge of what they are giving up in return, until an uncovered loss provides the lesson.  The old adage is nearly always correct, if it seems too good to be true, it usually is.  Cut-rate policies don't provide savings, the lower price you pay comes at the expense of accepting more of the risk yourself.  At the time of loss, at your most financially devastating moment, that's where the difference between cut-rate and correct protection shows itself.  You can either depend on your coverage, or wonder if it will protect you.

Want to know for sure if you have cut-rate Home Insurance?

Give us a call at the Ace Underwriting Group.  Dial the number above, or visit our quote request page HERE and give us some basic information.  We'll jump on your request and get back to you fast.  Armed with a copy of your current policy, we'll find the missing coverage causing you to be underinsured.  Then, we'll quote a policy with correct protection, limiting losses when disaster strikes with coverage expected to protect you properly.  But, the time to review your coverage is now, before a loss occurs.  Speak with one of our insurance professionals today.  Find out where you stand.  Proper coverage does cost more, but getting more protection for your money is value!  Smart homeowners buy the value of proper protection, instead of the savings and risk of cut rate coverage.  Call or click now for more information and your free Home Insurance review and find out for sure if your coverage has value, or cut rate risk!

August 4, 2019