Don't get burned by insurance coverage
Last week’s fire near Tampa, which destroyed a home, barn, garden shed, and all the stuff of life, is a stark reminder to review insurance policies.
No one thinks his or her house will go up in flames — certainly not Linda Nazeck, who, with her husband, Steve, lost most everything they owned April 5.
With grass fires burning across Marion County for weeks — most controlled burns that became out of control — insurance agents say it’s a good time for people to take a close look at their coverage.
Just like liability and comprehensive auto insurance, homeowners insurance comes in two forms.
An actual cash value policy — also referred to as appraised or market value — will pay out based on what the home is worth. A replacement value policy will pay out what it would cost to rebuild.
Some people can’t afford premiums for replacement value. For others, replacement coverage might not make sense, according to Alex Case, owner of independent agency Case & Son Insurance.
“We always try to give them options,” he said. “Let’s say you have a little old lady who has a 2½-story home on Elm St. that would take $700,000 to rebuild. She’s probably not going to rebuild that house. She’s going to take the insurance money and live in a retirement home or assisted living.”
In that situation, actual cash value coverage could make sense, Case said.
Case’s agency works with six to eight different insurance companies.
“Some companies have a better product for homes in the country,” he said. “Some companies won’t even insure homes outside of a certain protection class.”
Marion is in a protection class 5, Case said, which means a fire hydrant is within 1,000 feet and a fire station is within three miles. A home in the county may be in a protection class 9 or 10.
“Ten is the worst,” Case said. “That means there’s no fire station within 10 miles.”
People sometimes don’t understand the difference between different coverage options, he said.
“The best way to explain it is to use their roof as an example,” Case said. “If your roof is 10 years old and you have a replacement cost policy, you get paid for full replacement less your deductible. If you have actual cash value, they will depreciate your roof by 50% and that’s what you get.”
Premiums obviously are higher for replacement coverage.
“Someone may have an actual cash value policy of $100,000 when the replacement cost is closer to $200,000,” he said. “The difference in premiums might be 60% to 70% more.”
Instead of $2,000 a year for replacement coverage, an actual cash value policy could run $1,100 or $1,200, he said. Saving on premiums can be tempting for people on tight incomes.
“Most people will go through their entire lives living in a home and never have a devastating catastrophe,” Case said.
He has recommended actual cash value to about 10% to 15% of his customers “because they’re not going rebuild.”
Doug Heerey, who owns a Shelter Insurance agency, said some homes can’t qualify for replacement coverage because of their condition or age.
It’s an agent’s job to make sure people understand their options, he said, and guide them to make a decision that’s best for their needs. Most of the time, he said, that will mean replacement coverage.
Last modified April 12, 2023