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Replacement Cost vs. Market Value- The Great Debate 2009

Very interesting times for us all at this moment. The Economy continues to struggle to find a rebound. The Stock market is up and down each week. where do we go from here. My great concern for our clients and future customers is carrying the proper insurance on the one of 2 of their largest possessions, their home. the sale price of homes has continuously dropped over the past 12 months, and maybe finally stabilized. However, please realize that the cost of materials has not dropped in the past 12 months as much as market price. Actually, except for copper, lumber most other materials have increased in cost. Concrete, roofing, sheet rock, have increased in cost with demand for these products in third world countries, from 9/08 to present. we are seeing some slowdown in cost increases, however, with the talk of inflation around the corner, we will see cost of construction on the rise as the economy recovers. Therefore, do not, I repeat do not cut your Home value on that Home insurance policy, as I believe, most people will not remember to raise the coverage as the economy improves. If that is the case we will have a tremendous number of homes severely under insured, or better said, not insured to value.

Furthermore, everyone wants to hear they have “Guaranteed Replacement Cost coverage”. Beware, if you are less than 80% or with some carriers 90 % to value of the replacement cost at time of loss, your carrier claims adjusters have the ability to use this insurance to value ratio to “void” your Guaranteed Replacement endorsement. As the carrier will recognize that they were paid a inadequte premium for Full replacement, and they can then limit a total loss on your home to pay only the written insured value vs. unlimited replacement that we all want. I have been told by a premiere carrier home office executive, from Chubb, that ” in our history, we have never had a total loss claim, where the coverage was written for more than the cost to replace the home”. Therefore, i urge you, to not randomly reduce the coverage on your home. Last, in the words of William Wynn, Director of Emergency Management Agency, Beaufort count, “now is not the time to cut your coverage, when you have a hurricane hit, you will want all the coverage you can get your hands on” Contrary, to Suzie Orman, who suggest on her show to reduce home insured values, due to the economic environment we are in. Not prudent advice from her, I should say.

We welcome your inquiry at Premiere Coastal Insurance Group to discuss and evaluate your situation, and help you find solutions that work with proven , reliable carriers like Chubb, AIU Private Client Group, Firemans Fund and Others.

Rob Kerdasha

Premiere Coastal Insurance Group, Inc
PO Box 1805
326 E Bryan St., Parlor Level
Savannah GA 31401
Phone: 912-239-9477
Fax: 912-239-9643