As a homeowner, you need to protect your investment by reviewing your Homeowners Insurance policy limits annually to ensure adequate coverage in the event you need to rebuild as a result of an insurable loss. Unlike a home’s resale value, which includes the value of the land, the cost to rebuild is based on a variety of factors.
With ever-fluctuating home values, are you confident your Homeowner’s Insurance policy limits are enough to cover the cost of rebuilding your home, should the unexpected happen? The cost of rebuilding your house may be higher than the price you paid for it or the price you could sell it for today. The following tips will help you protect your investment and ensure you have the coverage you need – eliminating worry and additional hassles.
Review Your Policy Limits
Make sure that your home has sufficient coverage on an annual basis by contacting your insurance broker. In addition to reviewing your policy limits annually, let them know if you’ve remodeled, made an addition or purchased an expensive item for your home, such as a plasma television.
Your insurance broker will also need to know if you’ve made a major lifestyle change – for example, gotten married or taken in an elderly parent who owns expensive heirlooms. With these lifestyle changes may come new things that need to be accounted for in case of a loss.
Understand Your Policy
Read your policy to determine what exactly it covers. Most cover replacement costs, or payment for the cost to repair or replace damaged property using similar materials. A Homeowners’ policy also covers your home’s contents, but coverage will vary based on your policy. You will want to purchase additional insurance to cover jewelry, collections, artwork and memorabilia.
Purchase Additional Protection
A typical Homeowners’ policy protects against fire, lightning, wind storm and many additional perils (check your policy for specifics). However, most Homeowners’ policies do not protect against damage caused by floods, hurricanes or earthquakes.
If you live in an area prone to specific natural disasters, it is a good idea to look into additional coverage available as a stand-alone policy.
Insure Home Improvements
When making a major change to your home, it is important to talk to your insurance broker about insuring those changes. Be sure to let them know the specifics to ensure you have adequate coverage. If you remodeled a bathroom, they need to know whether you installed a standard bathtub or a whirlpool tub or if your countertops are now made of marble – it all adds to the value of your home.
Understand Rebuilding Costs
As a general rule, an average inland home costs about $150 per square foot to rebuild. Properties that are on water, on steep hills or are considered luxury homes are more costly to replace and could potentially cost upwards of $250 per square foot to rebuild. Consult a contractor for an estimate on your home.
Take Construction Costs into Account
Construction costs are on the rise, so your policy should reflect that. When reviewing your policy, consider the rising cost of materials, labor and supplies, and set your limits accordingly.
Don’t Play the Guessing Game
Contact your insurance broker for assistance on determining the value of your home. They can work with you to create a policy that will protect your investment.