What Is The 80% Rule for Tampa Bay Homeowners Insurance?

July 10, 2020

Tampa Bay homeowners insurance or insurance policies, in general, can be very confusing with the various components that they come with. The rules, nuances, and facets that accompany homeowners insurance are not easy to understand all at once. It has a list of complicated rules that can make anyone anxious, but there are obvious benefits of insuring your home.

Buying homeowners insurance Tampa FL can be confusing to new insurance buyers. What if I over-insure or under-insure my property? Will the insurance cover for damage caused by flood? Will my personal property be covered? These uncertainties can make you anxious. But with the 80% rule, you can be sure that you are neither under-insuring nor over-insuring your property. 

What is the 80% Rule? 

Most insurance companies adhere to the 80% rule while offering homeowners insurance Tampa Florida. It is considered as a standard rule that offers peace to the insurance buyer. As per the 80% rule, the buyer of homeowner insurance will only cover the cost of damage to the property or house if they have purchased insurance that is equal to at least 80% of the total replacement value of the property or house. In case the buyer of homeowner insurance purchases a cover less than the 80% minimum, insurance companies will recompense an amount that is proportional to the required minimum coverage that should have been purchased.

Simply put, the 80% rule means that the cost of damage to house or property is fully covered if the owner has purchased coverage that is equal to 80% of the total replacement value of the house. Anything less, the reimbursement will be proportional to the amount of coverage.

What Affects the 80% Rule?

The 80% rule and the value of the property are affected by inflation and capital improvement. The replacement value can change and is determined by the following:

  • Area of the property in square foot
  • Value of interior and exterior aspects
  • Value of the roof and floor
  • Value of fixtures and appliances
  • Labor needed to rebuild

The market value and the replacement value of your home or property differ widely, and it is vital to remember that insurance is purchased on the replacement value.

How Does Capital Improvement Affect the 80% Rule?

Capital improvements increase the replacement value of the home and, in turn, decrease the coverage value. When the house was insured, the 80% rule that applied was sufficient to cover for the damage. But as capital improvement increases, the damage for coverage decreases and will no longer be sufficient.

How Does Inflation Affect the 80% Rule?

During inflation, the replacement value of the property increases, and, in turn, the coverage for damage decreases. Due to this, the homeowners must review the Tampa Bay homeowners insurance policies to see if they have adequate coverage and be able to cover for damages fully. 

Homeowners insurance policies can be confusing in terms of coverage. But with the 80% rule, you can be assured that you are fully covered. The 80% rule is simple to calculate as long as you keep in mind that it is insured based on the replacement value of your home, and insurance and capital improvement can affect it.