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'1'[.-1) (,If,\1.(iF!}.:N Fhone: 920-N913 6141 WOOor-LC [DINA. MINN !!A-'.• April 16, 1979 Robert S. F, Margaret M. Olson Route 2 Box 8SA Maple Plain, MN SS359 Dear Bob: I)ONATA) A. DAHL Plane: 920-8973 I have finished reviewing your homeowners insurance because of the recent collapse claim submitted to Milwaukee Mutual. I would like to point out that although premium increases have been negligible in the past several years, the insur- able value of all types of dwellings has skyrok.keted. Des- pite this phenominal growth in the value of properties and residential construction in particular, many homeowners have failed to protect their investment by purchasing adequate amounts of insurance. The maior consequence of this is that in the event of a total loss --such as can occur in a fire or tornado --owners might find their insurance money woefully inadequate to rebuild their homes. An addit nal problem of underinsurance is the fact that all homeowners policies have a "replacement cost clause" whirr essentially says that if at the time of a loss the insurance limit is 80 per cent or more of the replacement cost, the policy will pay the full replacement cost of repairs. Other- wise it will pay only a portion of the replacement cost of repair! with a deduction for depreciation, which would reduce the payment to something less than the full cost of repairs. This so-called 80 per cent clause is often misunderstood by people thinking that they only have to insure for 80 per cent of the value of their dwelling, whereas all companies recommend that 100 per cent to value be maintained. In reviewing the collapse claim on your appurt,.,ant structures,' we have applied the figures from a Construction Cost Index furnished by an appraisal company and found that the amount of insurance you are now carrying is inadequate and would fall under the SP per cent factor referred to above. While the Construction Cost Index indicates a construction cost of $7.00 per square foot, the insurance company adjuFtor has indicated t.iat it could run higher than that. .. . 9 N' 1 1.`• FAnN�L .,no - 19"s .In ..a^ N 1