Insuring your home at replacement cost not market value is the key…
Consumers are often frustrated by the amount of insurance their mortgage company requires them to carry on their home.
Sometimes that amount is greater than the home’s market value; often it’s more than the amount remaining on the mortgage.
But many insurers still insist your home be insured for at least 80% of its replacement cost. Not its market value.
Here is the reasoning behind this and how it can help you.
First, the homeowners’ policy will replace – not just repair – damaged property. That means hardwood floors will be replaced with hardwood, not laminate, as it might be without this replacement clause.
Second, 99% percent of all homeowners’ losses are partial; only 1% of homes suffer a total loss.
Next, think of insurance as a big pool of money.
All insurance buyers put their premiums into this pool, and the insurance company invests the money and uses it to pay claims and expenses.
Insurers know if they collect premiums on limits of insurance equal to 80% of replacement cost, they will have enough money in the pool to pay full replacement cost for partial losses.
So if you don’t carry an amount of insurance that equals 80% of your home’s replacement cost, you will be penalized in the event of a partial loss.
Here is the formula used to calculate a partial payment:
(Amount of Insurance Carried / Amount of Insurance Required) x Amount of Loss
For example; your home has a replacement cost of $500,000. However, you must carry at least $400,000 in coverage (80% of replacement cost).
You owe only $300,000 on the mortgage, so that’s all you decide to carry. However, this is only 75% of the $400,000 you require.
If a fire causes $50,000 in damage you will receive only a 75% ($37,500) payment for this partial loss because you are carrying only 75% of the required amount.
Smarties Makers Got it Right After All
Concerned your guests may not like your special blend of hot chocolate? Try serving it in a red or orange cup.
According to a recent study in the Journal of Sensory Studies, people believed their hot chocolate had a more intense flavor when they drank it from a red or orange mug.
Apparently we identify certain colors with the characteristics of certain foods, suggests lead researcher Betina Piqueras-Fiszman, and people associate red with sweet things.
Brown packaging signals to coffee drinkers that inside they’ll find a strong brew. And what about that important question “When you eat your Smarties, do you eat the red ones last?”
Would the old jingle be as memorable if you ate the yellow ones last?
Craving an Out-of-This-World Vacation?
If you’re looking for an out-of-this-world-vacation, you might be able to do just that … literally! Astronomers have discovered what could be another Earth.
They have been studying five planets orbiting a star called Tau Ceti, similar to the Sun. If these planets are really there, one of them is roughly the correct distance from the star to host life, oceans and mild temperatures.
But don’t book time off work just yet the discovery still needs to be confirmed.
Astronomer Mikko Tuomi at the University of Hertfordshire in the U.K. and his colleagues looked at more than 6,000 different observations of Tau Ceti from telescopes around the world. They believe small changes in the way Tau Ceti moves in space could be caused by gravitational tugs from these five planets.
Only one of the five planets (about four times as big as Earth) could host life. The others are too close to Tau Ceti.
As a resident of this new Earth, you’d see a bright yellow sun in the sky, but your year would be much shorter – only 168 days.
Save Dollars and Heartaches with a Home Inspection
There’s nothing quite as much fun as spending money to furnish your new home.
Unless it’s that feeling of satisfaction that comes with a careful inspection by an accredited home inspector certifying your dream home is in great condition. It makes good insurance sense as well.
Your home inspection can be a money saver all around, so here are some suggestions to make the most of it.
A home inspection gives you insight into the history of your potential purchase, providing a record of previous repairs and identifying problems. Consider asking for extra tests of electrical, plumbing and HVAC systems; they may cost more, but it’s usually worth it.
While every home has problems that can be easily fixed, your inspection may identify serious problems: leaks, bad DIY repairs, electrical problems and fire hazards. In these cases, you’ll be glad you found out.
Fixing these could add thousands of dollars to your costs, but by not identifying potential problems you could be in even more difficulty.
You can avoid higher insurance premiums or more stringent mortgage terms by identifying – and dealing with – all the potential problems up front.
Effectively, a home inspection may wind up paying for itself in costs you can avoid. And by identifying problems before you sign on the dotted line, you’ll have a stronger negotiating stance with sellers – they will either have to fix the problems or reduce the price.
Even better: You may now have the extra cash to furnish your dream home.