Florida Homeowner's Insurance and the Slow Economy

In today’s slow economy, it is important for everyone to save money wherever and however they can. However, if you are considering making changes to your Florida homeowner’s insurance so you can pinch a few pennies, you should understand your policy and the things you shouldn’t go without.

What Insurance Covers

Florida homeowner’s insurance is intended to cover the actual cost of rebuilding a home in the event of a fire or natural disaster, cover things within the home in these events and in case of theft, and even protect you from liability in the event that a visitor on your property is somehow injured. However, the most important thing for you to consider is the actual cost of rebuilding your home – especially in today’s market. This is where many Florida homeowners are already underinsured, and it’s exactly where any changes should be very carefully considered.

Market Value

Your Florida homeowner’s insurance is designed primarily to rebuild your home in the event of a fire or natural disaster. However, insurers will often only cover you up to the market value of the home. In a slow economy, and particularly with today’s housing market, the cost of rebuilding your home is likely more than your home’s actual market value. This means that, even with your insurance, you will likely still be paying for part of this construction out of pocket. For this reason, you may want to consider purchasing more insurance rather than cutting back on coverage to save money.

Why Rebuilding Costs More than Market Value

There are two reasons why the cost of rebuilding your home in a slow economy is more than your home’s actual market value. First and foremost, in a slow economy, American consumers aren’t able to borrow as much from banks – nor can they borrow as easily. This makes purchasing homes more difficult and drives realtors to lower the prices on homes in order to turn them over, thereby reducing overall market value. Rebuilding your home would involve taking care not to disturb existing lines that provide utilities, demolition, waste removal and more prior to beginning the process of actually building. This makes new builds cheaper than rebuilds in the long run.

Where Can You Save?

If you are still interested in reducing your Florida homeowner’s insurance premiums, there are a few things you can look into. If you have flood insurance, for example, but you do not live in an area where flooding is a concern, you may be able to cut back on this coverage. Similarly, if you are carrying an abundance of liability insurance in the event that a guest is injured on your property, you could possible save a few dollars by reducing the amount of this coverage type; you should never do away with your liability coverage completely, though.

Before you make changes to your Florida homeowner’s insurance policy, you should first determine your home’s market value and the estimated amount it would cost you to rebuild your home. Then, you should fill in any gaps in coverage to make sure that you aren’t stuck with thousands of dollars in expenses in the event of a fire or natural disaster.