According to Marshall & Swift / Boeckh, a leading construction data provider on replacement costs, nearly two out of three American homes or 59 percent, are underinsured. The definition of underinsured is that homeowners on average have only enough insurance to pay for 78 percent of the cost to replace or rebuild their homes.
One reason for this startling statistic has arisen is that many owners do not update or periodically increase coverage on their homes. When homeowners remodel and improve their homes, they often fail to respond to a call to their insurance agent to update their coverage.
Another contributor is the soaring prices of building materials, energy and labor, all of which increased replacement costs by more than 7 percent a year since 01. If you been in this house for five years, insuring your owners was reduced to two-thirds coverage of the house solely by those increases.
consumer advocates say part of the problem lies in how home insurance is sold. In the competitive market, the last thing an officer wants is for the client to run into the street to a competitor because they got a quote for $ 50 less per year.
They say that many agents provide quick quotes to close a sale, the lack of training to properly assess the value of homes they insure and often rely on over-the-phone interviews to estimate the amount of coverage for the home of a client. The result is that owners purchase a discount coverage they mistakenly believe will replace their home in case of a complete loss.
This is not entirely fair to the insurance industry. Many owners have made improvements to the home and neglected to inform their insurance broker. The increase in labor and materials came to the hard point during reconstruction efforts after Katrina and Rita. The owners who are rebuilding after storm damage of this magnitude is also faced with new building code provisions that existed when the first home has increased.
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