Insurance Policy Coverages and Limits of Liability: Are Yours Sufficient?

We just received a notice from Allstate on the Landlord’s Policy on our rental townhome. Apparently, Allstate made a mistake on our policy, omitting a Home and Auto Discount we are entitled to receive for having our cars, primary residence, and rental property home insured with them.  Allstate gets two thumbs up for being honest about their mistake (I’ll give them the benefit of the doubt that some court didn’t order them to do this).  They claimed the mistake was due to an inadvertant processing error.  Having been a programmer in a previous life, I can certainly cut them a break if there’s a few bugs in their system.

But that’s not the subject of this article.  On Page 2 of their notice, Allstate lists the policy coverages and limits of liability on our policy.  Those coverages are:

• Dwelling Protection: $151,900.
• Other Structures Protection: $15,190.
• Personal Property Protection - Reimbursement Provision: $7,595.

When Kim bought the house in 2001, she paid a mere $95,000.  That was quite the deal, even in those days.  The neighborhood hadn’t risen with the housing tide despite neighboring counties’ prices soaring at 20+ percent.  In 2003, when we converted the home to a rental, $151,900 seemed pretty reasonable.  Similar houses were selling in the $135k-$145k range, so this gave us some breathing room in case a fire destroyed the entire house.  (Remember, insurance only has to cover the house, not the land, which is included in comparable resale prices).

Spring forward to 2006.  By the time December rolled around, houses were selling in the $195k-$200k range.  We didn’t even think about the insurance implications.  Spring forward once more to 2008.  While a housing depression plagues much of the U.S., the neighborhoods surrounding ours, mostly propped up by federal government jobs, haven’t waned nearly has much as the rest of the country.  In fact, the house immediately next to ours is listed today for $220,000.  We doubt they’ll get that price, but $210,000 is very possible in this neighborhood.

Of course, property values aren’t the only thing that has skyrocketed in the last 5 years.  Building costs have risen too.  Our $151,900 insurance policy that was sufficiently cushioned in 2003 is now woefully inadequate.  Fortunately, we already planned to switch to another insurance company because of Allstate’s rediculous Tropical Cyclone Deductible; so we’ll get this corrected when we make the move, which is now more urgent than ever.

What do you think?  Have you updated your policy coverage limits in the last few years?  Has your insurance company raised your rates despite no increase in coverage?

by: Fred | August 20, 2008 | filed in: Finance
Related Tags: allstate, dwelling coverage limits, housing value increase, insurance

share this article: stumble digg

Subcribe:

• Grab the RSS
• Get Articles via E-mail

Possibly Related Articles on this Site:

• Allstate 3% Tropical Cyclone Deductible
• Extra Heavy Items Clause in Lease Agreements
• FHA Loan Benefits and Disadvantages
• How to Take a Home Inventory for Insurance and Tax Purp