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Show Options To Insure Older Homes3'4 If it would cost more to rebuild your home than you could sell it for, traditional home insurance may not be for you. For example, suppose your home is 40 years old and has nine rooms, a pantry, plaster walls, built-in cupboards, a carved fireplace mantel and an ornate oak staircase. It may cost $180,000 to duplicate the house, but it may sell for only $60,000. In that case, there are options to regular insurance based on replacement cost, advises the Insurance Information Institute. Home owners generally seek to insure the home for its full replacement value, the amount needed to reconstruct the house. You must have insurance for at least 80 percent of the house's replacement value under the traditional insurance policy, or possibly not recover the full replacement costs for any partial damage. Market Value Policy However, an option recently was developed by Insurance Services Office, an advisory organization on insurance rates, statistics and policies. The optional policy allows for coverage based on the home's market value. In the cited example, that would be $60,000, enough to protect the home owner's financial interests and to provide for reconstruction with materials used to build houses today. The policy was developed for the owner of an older home who wished to purchase a package policy, including liablity and theft protection, because of depressed market values in his or her area. It was also designed to reduce the potential for arson that exists when there is a substantial difference between market and -replacmeent values. And, by allowing lower policy limits it reduces premiums, making coverage more affordable. The market value package policy: Provides protection, in addition to liability, against various causes of loss, including fire and lightning, windstorm and hail, explosion, riot, aircraft, vehicles, smoke, vandalism, glass breakage and theft (theft coverage is limited to $1,000 per claim on premises with a $250 deductible) ; Allows the home owner to select coverage consistent with the home's market value; After loss, covers the cost of repair up to the amount of the policy using materials that are commonly available; Reimburses losses according to market valr if no repairs are made. An option to buy additional coverage against theft is being introduced this year. It provides an additional $4,000 in theft coverage per claim. A second approach allows the home owner to add an endorsement to a standard replacement cost homeowners policy to reduce the amount of insurance required without penalty. Rather than the 80 percent of replacement value usually required, the coverage can be modified to 50, 60 or 70 per cent. Using this approach, the owner would recover the full cost of replacement in cases of partial loss or damage to the home up to the policy limit, as long as the agreed-on percentage was met. If there was a total loss, the policy could cover the cost of rebuilding using modern .materials and methods. The new market value policy is now avllaWe in 18 states and the optional endorsement is now available in 34 states. Your insurance agent, broker or company representative can give you further information. |