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Dear Sweet & Baker,

I've had my current home insurance policy since 2011, and now the insurance company says it has to do an "interior survey" of my home. We've never needed a home insurance inspection before.

I live in San Francisco, my home was built in 1950, and I've always had homeowners insurance. No one in my family has ever heard of this type of survey. Is it something new?

-Casey

Dear Casey,

Yes, the on-site home insurance inspection (also called a survey or appraisal) is something new.

Home insurance policies are designed so the coverage could potentially replace a home with a new one, and that's true even with a 63-year-old home like yours. The only requirement is that you must insure your home for its "full replacement cost." If you miss that mark and insure your house for less than what a replacement would cost, you won't have enough to rebuild in the event of a total loss and could be subject to depreciation penalties on partial losses.

Who determines what that replacement cost amount should be? Traditionally, an agent of the insurance company has used a computer program that factored in the type of structure, the square footage of each level, the number of bathrooms, the sizes of porches and decks, etc. That could be done relatively easily without a detailed interior inspection. However, after major storms, insurance companies have been discovering that people were buying coverage that was often way below today's replacement costs.

The need became apparent for a more accurate appraisal system, requiring on-site inspections and qualified appraisers. The cost of appraisals went up, but the accuracy improved. So yes, you will need to cooperate with your insurance company, and the home insurance inspection may be a bit of an inconvenience. But the good news is that the final appraised amount will be much more accurate.

With a 63-year-old home, be sure to request "a home replacement guarantee" that would pay at least 25% more than the home insurance amount in case of increased construction costs due to any supply and demand problems following a major storm that destroys or seriously damages multiple homes and has homeowners all wanting to be rebuilt at the same time.

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