Things to know about your homeowners policy!

[B. Jason Perry]

I had submitted an article last week regarding homeowners replacement cost and the need to make sure you have adequate coverage here in Southern California as the cost to rebuild a home has increased dramatically. (Most homeowners that I speak with are underinsured by about $60-$80 per sq. ft., because most insurance agents/companies don't do proper research. Most companies use replacement cost calculators that are not accurate for Southern California.)

Also, in a comment to an article written by William Johnson I had mentioned a document created by the California Department of Insurance call the "Homeowner's Bill of Rights".

At the time I made the comment, I did not have access to the document, but I wanted to post it now. All are valid points but i have bolded a few of the ones that related to the previous articles.

California Residential Property Insurance Bill of Rights

The largest single investment most consumers make is their home and related property. In order to best protect these assets, it is wise for consumers to understand the homeowners' insurance market. Consumers should consider the following:

Read your policy carefully and understand the coverage and limits provided. Homeowner's insurance policies contain sublimits for various coverages such as personal property, debris removal, additional living expense, detached fences, garages, etc.

Keep accurate records of renovations and improvements to the structure of your home, as it could affect your need to increase your coverage.

Maintaining a list of all personal property, pictures, and video equipment may help in the case of a loss. The list should be stored away from your home.

Comparison shop for insurance, as not all policies are the same and coverage and prices vary.

Take time to determine the cost to rebuild or replace your property in today's market. You can seek an independentevaluation of this cost.

You may select a licensed contractor or vendor to repair, replace, or rebuild damaged property covered by the insurance policy.

An agent or insurance company may help you establish policy limits that are adequate to rebuild your home.

Once the policy is in force, contact your agent or insurance company immediately if you believe your policy limits may be inadequate.

A consumer is entitled to receive information regarding homeowner's insurance. The following is a limited overview of information that your insurance company can provide:

The California Residential Property Insurance Disclosure.

An explanation of how your policy limits were established.

The insurance company's customer service telephone number for underwriting, rating, and claims inquiries.

An explanation for any cancellation or non-renewal of your policy.

A copy of your policy.

The toll-free telephone number and Internet address for reporting complaints and concerns about homeowner's insurance issues to the department's consumer services unit.

In the event of a claim, an itemized, written scope of loss report prepared by the insurer or its adjuster within a reasonable time period.

In the event of a claim, notification of a consumer's rights with respect to the appraisal process for resolving claim disputes.

In the event of a claim, a copy of the Unfair Practices Act and a copy of the Fair Claims Practices Regulations.

The information provided herein is not all inclusive and does not negate or preempt existing California law. If you have any concerns or questions, the officers at the California Department of Insurance's Consumer Hotline are there to help you.

Please call them at 1-800-927-HELP (4357) or contact them at www.insurance.ca.gov. Please also always feel free to contact your insurance agent or broker, or your insurance company directly with any questions or concerns.

[B. Jason Perry]

Yes there is a difference. I'm not sure what company started the guaranteed replacement cost contract, but it was many years ago and now AAA is as far as I know the only company that still uses it. There was a time before my time, when insurance companies lost A LOT of money due to that contract and to keep them solvent the changed to the now primarily used “replacement cost” contract.

I sometimes have potential clients that I try to encourage to increase their coverage but they tell me that with AAA it doesn't matter if they are underinsured they will still get their home rebuilt. Although this is true with a guaranteed replacement cost contract you can rest assured that you get what you pay for, and from what I've seen AAA is quite a bit below the average price for homeowners insurance. I'm not sure if their contract has changed but the guaranteed replacement policies they were also a "common construction rebuild", which means it will not be rebuilt with "like kind and quality" material like you will find is the case with other contracts. If you have an upgraded home with tile, wood, marble, custom cabinets, etc. you want to make sure you get a rebuild with “like kind and quality” construction.

There are three ways that an insurance company is able to sell insurance for less. The way it’s delivered, the way it’s serviced (paying a professional vs. a call center), and paying less for claims. When you pay for insurance to protect the assets that you’ve worked for your whole life you want to make sure that you are paying a professional, and that they are answering these questions for you.

[Melinda Stone CBC]

Is there a difference between replacement cost & guaranteed replacement? I think that is what AAA has.

[B. Jason Perry]

Absolutely not, this is what so many people think, which is why after the fires in San Diego there were so many people without the proper coverage. In my above article I posted the "California Bill of Rights" that was published by the department of insurance after the fires. This is required to be sent to every customer and explains to them their responsibility to make sure their insurance is sufficient.

The insurance company does its best using a “replacement cost calculator” when you purchase insurance with them. They also have a feature built into the policy to increase the replacement cost to keep up with inflation each year. The problem here in California is that our inflation on construction went up drastically higher than the average in the nation. I recommend to homeowners who want an exact cost to hire a replacement cost estimator “contractor” to come and give them an accurate replacement cost amount.

As an insurance agent I have called around to different contractors and received an average cost of replacement for each county surrounding my office so that I can better serve my clients. I have it broken down per construction quality of the home.

Most policies also have a built in feature to help reduce the risk of insufficient coverage called “extended replacement cost” which is an endorsement that will increase your replacement cost coverage by and additional percentage generally 20%-50%. This is to be used as a cushion.

Again, feel free to contact me for more information as it is very important to understand how you are covered.

[Melinda Stone CBC]

If you have 100% replacement value, isn't it then the insurance company's problem if they have not charged for the proper coverage? Especially if they come out and measure and review the home?