Homeowner's Insurance

The front page of today's New York Times has an interesting story about property insurance. In the late 1990's, most American insurance companies quietly switched from coverage that guaranteed the replacement of a destroyed home regardless of cost to a similar sounding type of coverage that would only pay the amount stated on the policy plus an additional 20 to 25%. While estimates vary, they all agree that most American homes are underinsured, usually by a substantial amount. One study contends that 64% of American homes are underinsured by an average of 27%. Perhaps one reason why this has not become more of an issue is that few houses are completely destroyed. (Today's article features a couple whose San Diego-area home was consumed by a wild fire in the fall of 2003). Nevertheless, homeowners have the responsibility to update the amount of their coverage. This is especially important given the substantial increase in real estate values over the past few years. On another topic, thank you to those blog readers who chose to comment on yesterday's posting. Please take a moment to read the posted comments and to add your own.