Insuring the American Dream

6/19/2003

For the vast majority of Americans, buying a home is the most important financial investment they will ever make. That is why protecting that investment is so important.

One of the most efficient and economical ways to protect that investment is through homeowners insurance.

Choosing the most appropriate policy can be confusing, though. There are a number of things to consider when purchasing insurance. There are three basic types of coverage: market value, replacement cost, and guaranteed replacement cost. However, many companies have their own special names, and consumers can get confused in the process.

The Fair Housing Center has tried to address this lack of knowledge on the part of the consumer by producing educational materials for them and conducting workshops.

Market Value refers to the current value of a house or merchandise. Replacement Cost is the amount it would cost to replace a home or piece of merchandise at current prices.

Guaranteed Replacement Cost is the amount it would cost to replace a home using the exact materials with which it was built. Choosing the correct policy can be confusing.

Most companies offer Market Value and Replacement Cost policies. Market Value provides protection up to the amount designated on the policy. In most cases, this equals the amount you could sell your home for on the open market. On the other hand, replacement policies will protect you for the amount it would cost to rebuild your home.

For example, let's say you just bought your house for $50,000. However, the house is brick, and it has wood finishing inside. It would take $100,000 to rebuild your house. If you purchased a Market Value policy, you would be insured for $50,000. If you purchased a replacement policy, you would be insured for $100,000.

Some companies adopt what is called the 80% rule. This would allow you to obtain replacement cost coverage by insuring your home at 80% of its replacement value. So in this example, you cold insure your home for $80,000 and still have replacement cost coverage. It's important to discuss with your insurance agent the policy that will adequately protect your investment.

The Center has worked diligently for the past 13 years with the homeowners insurance market to make sure that all qualified homeowners can be adequately protected. For many years, the insurance industry held on to beliefs that impeded rather than promoted equal housing opportunities. Several policies and practices, such as minimum insurance amounts, maximum age requirements, market-to-replacement cost value restrictions, and credit limitations, have made it difficult for homeowners in core city areas to obtain affordable, quality insurance.

The Center has been successful in convincing major players in the insurance industry to eliminate these prohibitive practices. In fact, the Center entered into a ground breaking agreement with State Farm Insurance Company in which the insurer agreed to eliminate the aforementioned practices and invest in America's urban neighborhoods.

Subsequently, the Center entered into similar agreements with Allstate, Nationwide, Liberty Mutual and Farmers. These agreements have expanded equal housing opportunities for millions of Americans throughout the country.

If you encounter barriers like the ones mentioned above when obtaining homeowners insurance, or if you desire further information about these restrictions, please contact the Fair Housing Center at (419) 243-6163. We can work with you to ensure that our

neighborhoods get the kind of quality insurance they need and deserve.