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Homeowners never think something as devastating as a fire is going to happen to them; their home. This is often the justification for not spending the time to review their home insurance replacement cost valuation with their insurance agent. But, devastating fires, storms, and even serious water damage can and does happen to good people every day.

I've identified 3 mistakes homeowners make by not reviewing their home insurance replacement cost valuation with their independent insurance agent.

Mistake #1:   They join the ranks of the Underinsured. It's been estimated that nearly 60% of homes are underinsured by 25% or more. I wrote about this a few years back. You can read about it here. The fact remains, most homeowners are underinsured. They don't want to spend the time with their agent to dive into the nitty-gritty of completing a home replacement cost valuation. Every time your home policy renews, your insurance company will remind you of what your home replacement valuation and then encourage you to review it with your insurance agent. Most people don't even open the policy renewal. It just goes right into their insurance file. 

Mistake #2:  They don't consider Debris Removal.  Most homeowners, and insurance agents for that matter, only think of what it would cost to rebuild the home. Many fail to consider the cost to remove the debris after the damage is done. Consider the picture above. The cost to remove the debris of this home could be tens of thousands of dollars before the home is even rebuilt. That money is included in the overall coverage amount for the structure (please read your policy under the Additional Property Coverages section for complete details of this coverage). Most companies will allow an additional 5% for Debris Removal if the damage to the structure and the cost for debris removal exceeds the limit of liability for the structure. This may not be enough though and you may find yourself short.

Mistake #3:  They jeopardize their Replacement Guarantee.  Many home insurance policies include Home Replacement Guarantees or Extended Dwelling Coverage. Often homeowners assume that if they have this coverage then they will automatically be protected and they don't have to review or consider the home replacement valuation. I've even seen insurance agents purposely under-insure homes to "win" the business, but in the end they(the insurance agent) are putting their client in a precarious situation. In order to qualify for the insurance companies Replacement Guarantee, certain criteria MUST be met. These are spelled out in your policy and I've written about it here.

If you avoid these mistakes you'll be able to sleep at night knowing that you're covered as best as you can be. Work with an independent agent who typically isn't just interested in making a sale but is more interested in providing the best coverage for your situation at the fairest price for that coverage. Finally, I would encourage you to review your Home Replacement Valuation every couple of years for accuracy. Building costs, labor costs, and other factors can change quickly in certain areas of the country, especially after a natural disaster. Don't be caught short.

Author Richard Morris

Richard Morris, an independent insurance agent in Gilbert, Arizona and Chandler, Arizona, has been serving and helping Arizona families and businesses with all their insurance needs for over 24 years. Visit his website at to see all the ways he can help you with your insurance needs or call the office at (480) 336-2707 or toll free at (888) 907-9349. Connect with Rich on Google+ and Twitter.

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