Auto Club Homeowners Insurance Offers Uncapped Replacement Cost
7 October 1998
Auto Club Homeowners Insurance Offers Uncapped Replacement Cost
LOS ANGELES--Oct. 6, 1998--With brush fires raging in the Southland, the Automobile Club of Southern California encourages homeowners to review their homeowner insurance policy to see if they are fully protected against catastrophic damage.
While most consumers shop for the lowest-priced policy, they also need to understand what a policy covers, particularly if their home is consumed by fire. A policy that may seem to offer full protection may not cover the full replacement cost of a home, according to the Auto Club.
"The lowest premium may look good on the surface, but consumers need to know what they are getting for their money," said Lawrence Baker, senior vice president, insurance. "Consumers should be sure that a premium reflects the proper replacement value of the home. Saving a few dollars on a premium could mean inadequate coverage in the event the structure needs to be rebuilt."
Inadequate coverage problems can be compounded by capped or extended replacement cost coverage. In other words, consumers should be aware that many homeowner insurance policies place a limit, or "cap," of 120 to 125 percent on what they may refer to as the extended replacement cost of a structure. This means that a homeowner who needs to rebuild and who has inadequate coverage will only receive a percentage of the value of the structure.
For example, if a $300,000 structure is underinsured by a policy that covers a value of only $200,000 and has an extended replacement cost limit of 125 percent, the policyholder would receive $250,000 and be responsible for additional costs to rebuild in the event of a catastrophe. A true guaranteed replacement cost policy would provide the policyholder with a full $300,000 payment.
Other insurers may offer policies that include the protection of an unlimited guaranteed replacement cost, but only at an additional charge. In many cases, the option is even not available. The Auto Club's homeowners insurance policies automatically include uncapped guaranteed replacement cost coverage for all homes built after 1950.
"The Auto Club's replacement coverage is uncapped. This means we will cover, according to the provisions of the homeowners policy, the entire cost of restoring the structure back to the original condition before it was damaged," added Baker.
The Automobile Club of Southern California, the largest affiliate of the AAA, has been serving members since 1900. Today, Auto Club members benefit by the organization's emergency road service, financial products, travel agency and trip planning services, highway and transportation safety programs, insurance products and services, automotive pricing, buying and financing programs and legislative advocacy. Information about these products and services is available on the Auto Club's Web site at www.aaa-calif.com.
Note to editors: The Auto Club can provide homeowners insurance quotes for consumer stories comparing premiums and guaranteed replacement cost limits.
