Why Am I Paying More For Insurance If The Value of My House Is Decreasing?
My home is only worth $120,000. Why does my insurance company want me to insure it for $175,000?
There are different methods to determine the value of a house. Market value is the price paid for your house. Replacement cost is the price or cost it will take to rebuild your house in the same spot, same size and same quality of construction, at today's costs. Insurance companies use the replacement cost valuation. These can be two completely different numbers.
For example, a home purchased in a depressed city neighborhood, may have a market value of $120,000. The exact house, located in a nice suburb, may have a market price of $175,000; however, the cost to rebuild the house after a loss would be the same in either location. The insurance company is looking to insure the home for the full replacement value, not the current market value. Remember, they are going to pay to build you a new home, not buy one for you down the street!
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Vanishing Auto Deductible
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A vanishing deductible is a deductible that reduces by a predetermined amount for each year you do not have a claim. For example, an insured with a $500 deductible who has no losses in year 1 or 2 will start with $300 deductible in year 3. This same client will have a $0 deductible for 5 years if there are no claims. This option is good for some clients who have very few losses over long periods of time.
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