Page 20 - AAA Northwest Ohio - AAA Now! January/February 2013

20 january/february 2013
insurance &
FINANCIAL SERVICES
needs, the homeowner makes the final decision of
what they want and what they can afford.
In 2008, a case involving a large, well known
national insurer who was taken to court by one of its
insureds, the Appellate District Court in Ohio upheld
a lower court ruling that placed the responsibility is
on the homeowner to maintain policy limits equal to
the replacement cost of the home.
Additionally, a recent poll commissioned by IINC
(Insurance Information Network of California) shows
that 61 percent of respondents statewide believe
that it is the homeowners responsibility to keep
their insurance current. Similar polling done outside
California supports this finding as well.
The best way to make sure you are not caught in
an underinsured situation is to understand your
policy and what it covers. Also, make sure you
have adequate coverage and that, if your policy
is more than a few years old, the values on which
you premiums are based are accurate for today’s
circumstances.
One of our friendly insurance agents here at AAA
Northwest Ohio can help you gain the understanding
you need. Achieve peace of mind that the coverage
you have is adequate to respond in line with your
expectations the event of a loss.
Of course, there is no obligation attached for us
performing this service for you.
Help your kids become
lifelong savers
Knowing how hard
it is to get your kids to
pick up their clothes, the
thought of getting them
to save for retirement
gives you fits of laughter!
Kids have the magic
of time on their side –
“tomorrow” is a million
years from now and saving is not a high priority
– especially with limited resources and so many
choices for spending those few dollars.
As tough as it is, it’s a parentingmust to teach your
kids the important skill of saving. There will come a
day when they must save for a car, their first home,
and yes, retirement. More andmore states are adding
a personal finance class as a high-school requirement,
but that’s only one component of a good saving
educational plan. Here are some other suggestions for
teaching your kids about the world of saving.
Show, not tell. It may sound corny, but the best
lesson you can share is by example. Show your
kids that you recognize the value and importance
of saving. Share the details of your savings plan.
Your kids will see saving as a normal part of your
routine…a habit they’ll continue.
Underinsurance Q & A
define the coverage can help avoid
problems after a disaster or major
insurance claim.
The main coverage, usually
called “Dwelling” or “Coverage
A,” should be equal to the cost
of rebuilding should the home
be destroyed. Insurers make an
honest attempt to estimate the
cost of reconstruction of the
home based upon the information
provided by the homeowner.
However, it is still only an estimate.
Also, the Coverage A amount is not
a function of the Tax Value or the
Market value of the home. These
can be very different numbers on
the same property. The Coverage
A amount is arrived at by a formula, which is a
function of the construction type and features of
the home, and is intended to arrive at what the
proper amount would be to rebuild the property
to its pre-loss condition. The tricky part is that, over
time, this amount can change markedly, driven by
materials, costs, labor rates and/or building code
changes, among other things.
Many homeowner insurance policies now offer
protection to help avoid underinsurance problems.
Some policies provide general upgrades of the
coverage limits of 25-to-50 percent. Others provide
additional coverage specifically for building code
upgrades. Also, in the event of a Total Loss of the
home (think fire or tornado) many states have a
Valued Policy Law which stipulates that the full
amount of the Coverage A as shown on the Dec
page of the policy must be paid to the named
insured policyholder and any Mortgagee on the
policy.
For “Personal Property,” or “Coverage C,” a
homeowner should make a complete inventory of
all belongings. This will help determine the cost of
the personal property so that it is reflected in the
policy. A comprehensive home inventory can also
serve as a shopping list of everything that will need
to be replaced should the home be destroyed or
burglarized.
Q. Whose responsibility is it to make sure that a
home is adequately covered by insurance?
A. State courts have held that it is the homeowner’s
responsibility to make sure that their property is
properly insured. Although insurers take many
precautions to match coverage to a homeowner’s
Q. What is underinsurance?
A. Underinsurance describes an insurance policy
that has a stated limit that does not adequately
cover the replacement cost of the insured item.
This could include a home, auto, jewelry or artwork.
The process of adequately insuring property is also
known as “insuring to value.”
Q. What causes underinsurance?
A. Underinsurance may be caused by many factors,
ranging from a failure to update a policy in a timely
manner to an underestimate of reconstruction
or replacement value. Failure to report new
construction or additions to the property or a
decision not to purchase sufficient insurance due to
cost could also lead to underinsurance problems.
The cost of reconstruction of a home may also
be estimated incorrectly, particularly in the event
of post-catastrophe construction price spikes,
these a function of upcharges for material due to
demand and also for labor because of the sudden
and urgent need for workers in the affected area.
Particularly difficult to predict are changes caused
by new building codes enacted after a major
disaster. Building code upgrades could be minor
changes or may involve complex questions of
infrastructure and redevelopment. Homeowners
can protect against this by including building code
upgrade coverage in their home insurance policies.
Q. How can a homeowner make sure the
insurance policy adequately covers the home in
the event of a total loss?
A. Homeowners should first fully understand the
policy they plan to purchase. Knowing what it
covers, what it doesn’t cover and what conditions
One of the most important aspects of buying an insurance policy to protect your property is the
confidence is that it is written correctly and that, in the event of a loss, it will respond as expected. The
cornerstone of this peace of mind we seek is grounded in having determined the correct values for the
property in question.
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