Take a moment to consider the worst that can happen to your home. A storm causes lightning to strike. The home catches on fire. In a matter of minutes, the damage is so bad it can’t be repaired. You turn to your home insurance company for help. How much will they pay to help you rebuild your home? That depends on the type of Coverage A insurance you have. Let’s explain.
When You Buy Home Insurance
One of the most important decisions when purchasing home insurance is determining the amount of coverage you need. Your Coverage A policy needs to provide enough money to you to cover an event like this. However, how can you put a dollar value on that amount?
Here’s a hint. Your insurance is more than the market value of your home. If you were to list your home for sale today, you might get $200,000 for it. However, if you turned to a builder to rebuild your home, it may cost upwards of $250,000 or more. How can that be? There are many reasons.
The Cost to Rebuilding the Home
The biggest factor that plays a role here is the actual cost of construction. It costs more to build something than to buy it. You’ll pay more for the materials, the labor, and even the highly expensive timber that’s in short supply. In our area, these are some of the most common reasons why construction costs are so high.
Property Values Increasing
Another key factor that can raise the value of your home is the local market. In Waukesha, Wisconsin, we’ve seen a significant rise in home values over the last ten years. If you purchased a home before this time, you probably spent significantly less to do so. That can impact the costs associated with rebuilding your home. More specifically, home builders are charging more knowing that home values are on the rise.
Your Mortgage Lender
It’s important to know what your lender requires, too. Nearly all mortgages require the property owner to maintain full and comprehensive insurance on their home. It covers their investment into your property. If you live in a home that is underwater – meaning you owe more on the home than it is worth – it pays to have enough insurance to cover the debt. Imagine what may happen, for example, if the home is lost in a fire and the policy pays out only a fraction of what you owe. You’ll be financially responsible for those funds.
How Can You Ensure You Have Enough Insurance, Then?
Putting a dollar amount on your home’s insurance needs isn’t easy. However, your agent at Carrigan Insurance can help you. We can use a Replacement Cost Estimator tool to provide more insight into this. It can provide information about what to expect if you were to need to rebuild your tool.
There are a few more things to know, though:
- Don’t calculate the value of anything in your home when determining this value. That’s covered under your home’s contents coverage.
- Your needs may change over time. If you have not updated your policy in the last few years, this is the time to do so.
- Ask your agent about Extended Replacement Cost. This is a policy endorsement that can help to cover the extra costs associated with your home’s needs. Many of our clients like this policy because it gives them a bit more protection.
Numerous factors play a role in determining how much home insurance you need for your property. It’s our job to help you get the details just right.