As Florida’s premier public adjuster, Noble Public Adjusting Group has discovered over the years how many Florida homeowners do not know what the insurance policy they have on their home actually covers. Unfortunately, most of these discoveries come after homeowners have experienced a loss. It often happens that homeowners end up not getting near the payment they should in an insurance settlement due to what is called a ‘coinsurance penalty.’
In many cases, this is why Noble gets hired, to try and save a homeowner from receiving a coinsurance penalty, and to unravel a poor insurance policy. Not that we don’t love getting new business, but Noble is more concerned with helping homeowners be proactive by understanding their insurance policy and learning exactly what it covers so that if you have a loss at your home you will get the best settlement possible.
As part of our mission to educate homeowners about their insurance policy, today on the Noble blog we would like to explain to our readers exactly what a coinsurance penalty is and how to avoid taking this penalty when you have a loss at your Florida home.
The first thing to be aware of is that most Florida homeowners’ policies do not contain the term “coinsurance.” The wording of coinsurance in your insurance policy is going to be, “insured to value clause”. What you are agreeing to when you have this clause in place is to insure your home for an amount of no less than 80% of the home’s replacement cost value.
Let Noble Public Adjusting Group explain how the “insured to value clause” works. When you buy your Florida homeowner insurance policy, you agree to insure your home for no less than 80% of the replacement cost value on the building immediately before the loss. In order to do this, you must know how much it will cost to totally rebuild your home from the ground up. It is crucial to understand that the replacement cost value is not what you paid for the property originally nor is it how much you could sell your home for today. It is what the repairs will cost to restore your home back to its pre-loss condition in the event you experience a total loss. If you fail to insure your Florida home to the proper value, you could receive a coinsurance penalty.
Confused yet? Just wait until you see the below formula insurance companies use to determine if you insured your home correctly.
Did ÷ should = % x amount of the loss – the deductible = settlement amount
Let us try to clear things up. Take the amount for which your Florida home is insured and divide it by the replacement cost value of your home. This will result in a % amount. If that % amount is 80% or more, you are safe and your home is insured to value, and a coinsurance penalty will not be applied to your loss. If that % amount number is less than 80% you will then multiply that % number by the amount of the loss. You will then subtract your deductible and that will result in the settlement your insurance company will pay you. Let’s use a simple example:
Your Florida home is insured for $100,000.00
You should have insured it for $200,000.00
You have a loss which totals: $50,000.00
Your deductible is $1,000.00
Using the formula from above, here is what you end up getting from the insurance company, $24,000. That is less than half of the total loss, which means you are going to end up paying the other half out of pocket, $26,000!
$100,000 / 200,000 = 50% X $50,000= $25,000.00 – $1000.00 = $24,000.00
One very important thing to keep in mind is that your insurance company is not going to prompt you to upgrade your insurance policy. In fact, they are banking on policyholders not knowing this is needed. It keeps them from having to pay out as much on insurance settlements. Insurance companies are in the business of making money, not shelling it out. That’s how they remain profitable.
Think it’s time to review your Florida homeowner insurance policy? After reading this Noble blog post, you know for sure it is. One of the services we offer at Noble Public Adjusting Group is going over your Florida homeowner insurance policy with you. This is a complimentary service. Call us today and let one of our professional public adjusters visit you at your Florida home and handle this. Many homeowners then will find the need to upgrade their insurance policy. We can offer advice on how to do this, and point out the needed upgrades. We work for you, the policyholder, not for insurance companies. Our main goal is to make sure you as a homeowner understand your insurance policy and you are confident that it will pay you the best settlement if you receive a loss at your home. We love taking on corporate insurance! That’s why they call us Noble, because we fight a noble cause, defending policyholders against the big guys.
Noble has offices in several Florida locations. Call us today to discuss your homeowner insurance policy and ask any questions you have about the coinsurance penalty and how to avoid it.
Noble Public Adjusting Group
107 Amar Place Suite 103
Panama City Beach (West End), FL 32413