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You know your home or commercial building is worth $200,000.  Yet you are only insuring it for $100,000 as Replacement Cost.  Why?  Well, because you like the premium for $100,000 worth of insurance much more than the premium to insure to value!

But here's what happens when you don't insure to value.  A major hailstorm rolls through (and we're right on the verge of storm season!) and totals your $50,000 roof.  You turn in a claim, and the insurance adjuster comes out to inspect the damage.  "Wait a minute," the adjuster tells you.  "Your building is worth $200,000, easy.  Yet you're only carrying half that amount.  So we're only paying 50% of your claim!"  That's right; you're only going to  receive half the amount it takes to replace that $50,000 roof (minus your deductible as well).  It's what's known as the coinsurance penalty.

And let's not even think of a catastrophic loss.  If a wedge tornado takes your building off its foundation, you're only receiving $100,000 to replace a $200,000 structure.  So it never pays to underinsure.  Insure to value!

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