What is the replacement cost for homeowners?
Disaster can strike at any time. No one is immune to the threat of losing their home due to a number of possible dangers. But a new survey showed that most homeowners are severely underinsured. Marshall & Swift / Boekh, a leading company in insurance data services, found that 66% of homeowners had insufficient coverage with an average of 1
Market value versus replacement cost
The market value of what your home would sell for today is very different from the coverage cost coverage to ensure the rebuilding of a home properly. The market value takes into account the land value, depreciation and other related market factors, while the replacement cost simply reflects the cost of rebuilding a home. These can be very different.
For example, you could have a home worth $ 400,000 in a block, while an identical home across the city could have a market value of half as much, even assuming they were built in equal sizes. But actually replacing these homes – rebuilding them with similar construction methods and materials – would in principle cost the same for both. Reconstruction costs can be higher or lower than market values, as factors such as land value and depreciation do not affect the reconstruction.
Sitting down with your agent to review the features of your home is very important, as homes with features such as crown molding, hardwood floors and tiles cost more to rebuild. Other factors, such as special kitchens or luxury kitchens, can increase significantly to remodel costs. Your agent will take into account these and other factors, including the total square footage of your home, to determine the total replacement cost. This is the amount you should insure your house for. This is sometimes called "Coverage A" in your homeowner.
Separate structures, sometimes called "other structures" or "Coverage B", refer to any structure. located on your property, but not connected to your main house. Examples of separate structures include:
- Detached garage
- Garden house
- Detached load-bearing system
- Retaining walls
- Outdoor kitchen
Most household policies include separate structures (separate structures) corresponding to 10% of the insurance amount on the main house (coverage A). If the number and value of separate structures are significant, such as a detached house or many other than an object listed above, a separate valuation should be made for each to determine if additional coverage is needed. If you only have a normal-sized fence and nothing more, you will probably be fine with the 10% figure. However, in either case, this should be addressed when discussing replacement costs with your agent.
Your homeowner's policy will automatically include personal property coverage, which is a separate item sometimes called "Coverage C" that can equal 50% to 75% of the coverage amount. If you have a typical amount of personal property in your home, this should be enough. However, if you have a lot of personal property or have things of higher value, you can discuss additional coverage with your agent. Items such as jewelry, weapons, coins, computers, businesses, and high-risk properties typically have policy sub-limits, some of which may be $ 1,000 or less. Such special items should be discussed with your agent, especially if you have them worth over $ 1000. A homeowner's policy has many options for increasing these amounts for personal property insurance.
Larger homes and other special risks
In some cases, the insurance company will get a valuer and visit your property. This will provide a better rating than just relying on a database estimate. This is usually done for homes larger than 5,000 square meters, for certain commercial properties or for structures with unusual properties, such as unique craftsmanship and materials, historical value and other special considerations.
Know the value before a disaster  Knowing the value is part of good financial planning and risk management. What you do is protect what you have as well as the investment in your home. Replacing yourself only creates problems when a claim occurs. The worst thing you can do is deal with value after a claim, because then it's too late. That's why it's best to deal with this now and let insurance serve its purpose and allow you to smoothly continue with your life after a claim occurs.
Be sure to take a detailed home inventory before any disaster occurs. Take pictures and record serial numbers where applicable, especially on high value personal property. There are a number of commercial websites that can help you with this process and automatically store this information outside the website, where these important items are not exposed to the same disaster that is affecting your home and your property.