"Our insurance company increases the amount of our homeowners coverage each year. They say that the increase is for replacement cost. They also say that the increase does not necessarily reflect market price. I do not feel like paying an additional insurance premium for that. Do I have a choice?" --

Dear Over Insured: You probably elected to receive an annually-adjusted premium to cover "replacement cost" when you bought your homeowners insurance policy. Had you not chosen that provision, your policy would only cover damages up to the replacement cost at the time when you purchased your home. A replacement cost insurance policy monitors the current costs to replace your home in your specific area. The good thing about this type of policy is that in the event of a covered event, your insurance company should pay for the actual cost to replace the damage (less your deductible). The "bad" thing is that as prices charged by all of the vendors involved in the rebuilding processes increase, so does your insurance premium. Contact your insurance agent to obtain the "pro's and con's" involved in changing your type of coverage.