Have you looked at your homeowner’s insurance policy lately? If it’s been a year, it may be time for your annual checkup – for your homeowner’s insurance. What may cover you a year or so again may not be enough now, especially with home prices? Also, you may not have enough coverage if something happens.
The first thing to do is call your insurance agent and ask them a few questions.
What is my coverage?
Replacement Cost? This is the most effective type of insurance coverage. This covers the replacement costs to rebuild your home and replace your belongings (up to the limits listed in your policy).
“Extended” Replacement Cost? This coverage offers protection on your policy limit. For example, should your coverage only covers $850,000, then the “extended” replacement costs could allow an additional 20% on top of that if the loss is greater than your original $850,000 cap. The “Extended” Replacement comes in handy when material costs to rebuild see an increase (like lumber now).
“Actual Cash Value”? This coverage is not as attractive as the previous coverages and does take depreciation of real and personal property into account. If your TV is older and damaged, the amount you will receive to replace it will not purchase that same TV today.
The first two coverages may be the better option; however, even if you have replacement value for both your dwelling and personal property, not everything may be covered. Extra sheds or separate garages may require additional coverage as well as jewelry and high-dollar items. Replacement values of those items are usually capped. Insurance riders may need to be purchased to make sure you are fully covered.
So, does your home and personal property have enough coverage?
Let’s say you purchased a home a few years ago for $850,000. Today it’s worth over a million dollars; even if you increase your insured amount to $1.5 million, it may still not be enough. If your home suffered a total loss, the cost to rebuild would probably be more than $1.5 million to build it from the ground up. So your insured value will need to be what it will cost to rebuild, not what the market value.
Now, I’m not an insurance agent, and your agent would be able to answer your questions. However, this article is only for informational purposes to give you possible suggestions to ask your insurance agent. Your agent will know what is best for your situation and will guide you accordingly.
Call me or fill out the form below if you would like to know what your home is worth right now so you can have a guideline to give your agent.