Hello, and welcome to our blog!  This will be a place where we answer frequently asked questions, as well as address issues that many insurance shoppers (and, unfortunately, many agents) are unaware of.  Whether you are looking for auto insurance in Indianapolis, home insurance in Shelbyville, or anything in between, we hope that this will be a place you can come for answers and insight.

Today’s topic is one of the biggest issues that we run into as we write Indiana home insurance, and that is making sure that homes are insured to value.  First-time homebuyers and insurance newbies share a misconception with some mortgage brokers and real estate agents; that a home should be insured for its market value, or for the amount of the mortgage. 

Actually, a home should be insured for what it would cost to rebuild it from scratch.  This is for two reasons.

1.  In the event of a total loss, you will want the home to be rebuilt, right?

2.  Every Indiana home insurance policy contains the same clause (the insurance to value clause) that states that if a home is not insured for the replacement cost, the company in question only has to pay Cash Value for a loss. 

Now, point one is probably self-explanatory, but allow me to give an example for point 2.  In this scenario, your home is worth $80,000, but it would cost $150,000 to rebuild (a common scenario in the Midwest right now), and you have it insured for $80,000.  You have a kitchen fire, and while most of your home is fine, there is $15,000 in damage to your kitchen.  According to the policy (and state law), you might only get $7,000 for your loss, and have to pay out of pocket for the rest of your repairs.

If you are anything like me, you would rather pay insurance premium for a policy that won’t leave you in this kind of a situation.  This is why each homeowners insurance policy that we write is done using highly advanced software to calculate replacement cost, which allows us to write your policy safely and without guesswork.

If you have any questions about this, or any other questions about Indiana home insurance, contact us today! 

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