Do I have to rebuild in the same spot if my house is destroyed?

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“If my house is destroyed, do I have to rebuild in the same place?  Can I cash out and move?

This is a very big question when you’ve just had a major loss to your home.  If you’ve suffered significant damage to the point of needing to move out, you may be asking whether or not you’d really like to stay in the same neighborhood.

Maybe you never liked the location.

Maybe you’d been thinking of moving for a while anyhow.

Maybe you got new neighbors and you can’t stand them.

Regardless, you’re ready to move on.  The question is, can you?

The short answer is that yes, you can.  However, the amount you get from the insurance company depends on what type of policy you have.  There are some policies out there that have the option to cash out, but you will want to verify that by checking with your agent or insurance company.

The information below will help you determine what type of coverage is on your policy:

  1. Locate your homeowners policy and find out if you have your home listed at Replacement Cost or Actual Cash Value.
    • Replacement Cost:  If the house is totally destroyed, this is the amount it will take to completely rebuild it.  If it takes $350,000 to rebuild your house today, you’ll want to insure for that amount.  This amount is usually determined by a replacement cost estimation, typically calcuated by the insurance company or the agent.  This is very important because if you have too little coverage, you may not have enough to rebuild.  FAR too little and you may even face an additional penalty on top of that for not properly insuring your property!  On the other hand, too much coverage and you will have found yourself overpaying for your insurance.  If your $350,000 house is insured for $900,000… sorry, you’re only getting $350,000.  Talk to your agent today and make sure this is an accurate amount.
    • Actual Cash Value:  This is the replacement cost minus depreciation.  In the event of a loss, the company will take into account the age and condition of the home to determine the payout as result of a claim.
  2. Let’s say you’ve found that your home is insured at Replacement Cost.  Now you will want to determine whether you have a standard policy or one with a Cash-Out Option.  The Cash-Out Option is exactly that, and should be worded very plainly.  This is the determining factor as to whether or not you can cash out at full value.  Word of caution:  This is NOT Guaranteed Replacement Cost.  That is a completely different coverage.
  3. If you are unable to determine whether or not you have this coverage, it’s time to find out.  Your agent or insurance company should be able to tell you what you have.  They can also tell you if a Cash-Out Option available at all through their carriers, as only a select few companies offer it.

If you have the Cash-Out Option, congratulations!  If you face a total loss, you will receive the replacement cost amount on your home whether you decide to rebuild there or not.  If you do not, you will only receive the replacement cost amount if you decide to rebuild in the same spot.  If you decide to cash out and move, you will receive the depreciated amount.

If this is something that sounds interesting to you, be sure to check with your agent and see if it’s a coverage that can be provided.  Otherwise you can always contact us here for a quote at the link below and we can discuss what this sort of plan would look like for you.

Why Do My Auto Insurance Rates Keep Going Up Even Though My Car Keeps Getting Older?

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Why do my auto insurance rates keep going up even though my car is getting older?  At Ovation Insurance, many of our clients ask this question so I would like to address it from a couple of angles.

First things first, even though it’s called car/auto insurance, it covers more than just your car. It should technically be called “auto-owners” insurance, similarly to how home insurance is actually called “home owners insurance”.

It’s important to understand that there are a lot of variables that go into insurance premiums, and with auto insurance, it’s no different.

The insurance company is much more concerned with you crashing into someone and causing them (or yourself) bodily harm, or death, than they are about your car. A car is a material possession which can be replaced.

A human life is not.

When is the last time you looked at your auto insurance policy?
If you look at it you’ll notice there are a lot of different coverages on your auto policy.

Bodily injury
Property damage
Un-insured motorist
Under-insured motorist
Medical Payments
Loss of Income
Funeral Expense
Loss of use
Rental Reimbursement

These are all things that you are covered for on your auto policy. How many of them have to do with your car?

None.

How many of them have a price next to them on your policy?

All of them.

Your car isn’t the only thing you’re being charged for on your policy
That’s because auto insurance covers far more important things than your car as mentioned above.

Let me re-phrase that: your car insurance rate isn’t just based on your car.

You’re not the only one…
It’s also important to understand that you are not the only person your insurance company insures. You are one fish in an ocean of other fish, sharks, and sea creatures, all who have different characteristics and risk profiles.

Insurance is all about spreading costs over a large number (risk pool) of people, which each person paying their fare share. That risk pool is constantly changing, and is impacted by a ton of different things, including the overall economic climate.

This means that you are sharing in the cost of millions of other people, many of whom may have poor loss history and/or credit.

That’s what insurance is though — sharing in the cost.

The next time your auto insurance rates go up, take a look at the big picture. Make sure you’re looking at ALL of the coverages, and corresponding rates.

Hope this helps!  If you would like to know more about Car Insurance be sure to visit our page dedicated to it.

Will my credit rating change my insurance rates?

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I was recently asked this question by one of our  clients, and thought I would share the answer here for our readers.

There are a lot of things that go into homeowners and auto insurance rates, one of them being credit. I’ve heard a lot of complaints from people who don’t like the fact that insurance companies use credit in their underwriting.

Some people have absolutely no idea that it’s used in the rate at all.

At the end of the day, there’s not much we can do about it though. Insurance companies have been using credit in their rates for decades, and that’s not likely to change.

By the way, insurance companies don’t pull your credit like a mortgage company or credit card company does. There is no negative impact on your credit as a result of an insurance company looking at it.

When I say “pull” what I mean is that the insurance company is doing what’s called a soft inquiry, which is not the same thing as having your credit pulled (hard inquiry).

When does credit play a role in insurance rates?
It’s important to understand that insurance companies don’t continuously check or monitor your credit. Usually, they only check it when you first get a quote and/or sign up with them in the very beginning.

This means that if your credit score increases (or decreases) your insurance company does not automatically know about it.

So, to my customers question of whether or not his increased credit score will lower his rates, the answer is not automatically.

What has to be done on our side as the agent is contact the carrier the insurance and ask them to do what’s commonly referred to as a “re-score”. This is when the insurance company can re-run the person’s credit (soft inquiry) to see if there is any positive bearing on the rate.

This isn’t something that the insurance company is going to let the agency do every single year, so it’s not worth even asking unless there has been a significant change in your credit score, and only you as the customer would know if that was the case.

If you’d like to get a better handle on your credit rating, it could be helpful to setup credit monitoring. We hope this was helpful! As always, leave us comment below if you have any questions.