I own my home outright after the death of my husband and want to reduce my insurance amount. The agent says I can’t. I don’t understand.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 15, 2021

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The homeowners insurance policy is intended to replace or repair your home if it is damaged by a covered peril so the insurance company wants the home insured to its full replacement cost. They don’t want to over insure the home, but if it’s underinsured, the premiums the company collects will not reflect the actual financial exposure they face. In view of this, insurance contracts include a clause that says if the home is insured for less than 80% of the replacement cost, the policyholder will be penalized with a reduced payment for the covered loss. Also, you do not want to be underinsured, especially if there is a total loss, since you wouldn’t be paid enough to rebuild the home.

You can contact another agent to see if they agree with the amount of insurance that your present company is requiring. Insurance companies have different ways of determining rebuilding costs, so you may find a company that will write a lower amount of insurance. However, you still want to be sure you have enough insurance to rebuild the home.

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