Home Insurance Forum

Jun. 19, 2007

I have received my homeowners renewal policy with a note from the company stating that the HO-5 — Guaranteed Replacement Cost on the Dwelling — policy is no longer available. Is this an industry-wide decision in New York state or is it due to the fact that this particular insurance company's loss record indicates it must discontinue it? The company is State Farm.

Kim, New York

Dear Kim,

According to State Farm, it has not offered the HO-5 plan in New York since 1997. Although it is not an industry-wide decision, many companies chose to discontinue the plan, largely due to the incredible losses incurred after Hurricane Andrew in Florida destroyed thousands of homes. The HO-5's unrestricted replacement policy cost insurers thousands of dollars. In the interest of keeping premiums down, State Farm and others terminated the plan.

The best way to go if you want full homeowners coverage is to insure your house for its full value. You may wish to hire an outside contractor to appraise your home's present cost to rebuild.

For more, read Home Insurance Basics.

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