As they work to rebuild after the storm, many of these homeowners are experiencing an unexpected hardship – insurance companies that won’t pay for all repairs due to a little-known policy called the 80% rule. For some homeowners, the news that they’re underinsured comes as a shock and leaves them holding a steep repair bill. —
Why the 80% Rule is Hurting Storm Victims
Most homeowners know the importance of insurance. Despite this, it’s often hard to determine how much insurance to buy, especially since the value of a home can increase over time. For many storm victims, the cost to repair their home is still less than the amount their home is insured for, making them believe their claim will be paid out.
However, insurance companies are able to use the 80% rule to pay homeowners less money on their claims. If a homeowner’s policy is for less than 80% of the current replacement value of the home, then the company will pay only a portion of the damages. They will calculate the payout amount based on the percentage that results from dividing the value of the insurance policy by the amount of insurance required.
For example, if a home is valued at $200,000, then the home must be insured for at least $160,000, as this is 80%. A homeowner may unknowingly insure it for $150,000. If the home has $75,000 in damages, then the insurance company will only pay out a portion of this amount. They will determine this payment by dividing the $150,000 by $160,000, which means the payout will be 93.8% of the repair costs. The homeowner will only receive $70,350, leaving them owing $4,650 out of pocket.
Homeowners May Not Have Been at Fault
Many homeowners who find themselves facing the 80% rule thought they were covered. But with home prices rising with inflation and capital improvements increasing a home’s value, suddenly an insurance policy that once covered the home’s replacement value is no longer enough. These homeowners are now facing massive out-of-pocket expenses that they had no reason to expect. All homeowners should check their insurance policies to make sure they won’t be saddled with extra payments due to the 80% rule.
For some homeowners facing costly repairs, it may be less costly to sell home as-is. A home that needs extensive repairs can be hard to sell, however. These homes can languish on the market, costing the homeowner even more money and making it hard to rebuild their lives. In this case, the best option could be a cash buyer, as home investors are able to repair the damage themselves.
For more information about As they work to rebuild after the storm, many of these homeowners are experiencing an unexpected hardship – insurance companies that won’t pay for all repairs due to a little-known policy called the 80% rule, contact us at (832) 232-4663 or visit http://www.needtosellmyhomequick.com/ for more information.
Release ID: 293651