Imagine how devastating it would be to lose your home in a fire and not be able to rebuild it completely because you did not have the right amount of insurance.
Choosing the right coverage is the single most important decision you can make with your homeowner’s policy. Without it, you may not have enough coverage to rebuild after a total loss. This is called “insurance to value”. Below are some explanations and tips to help you make the right choice for your needs – and remember that if you need help, we’re just a phone call away!
What is insurance to value?
Value insurance is the ratio between the selected insurance amount (usually listed as “Coverage A” or “Home Protection” on your insurance declaration page) and the amount required to rebuild your home. Insuring your home for anything less than 100% value insurance may mean that you would not have enough coverage to replace your home in the event of a total loss.
Why does the cost of rebuilding differ from the market value?
The market value of a home reflects current economic conditions, taxes, school districts, the value and location of the land and other factors that are not related to the construction cost. The cost of rebuilding your home is based solely on the cost of materials and labor in your area. It is important that you insure your home based on its reconstruction cost, NOT its current market value.
Why is remodeling more expensive than new construction?
Settlers usually build many homes at the same time and ask for bids from different subcontractors to get the best price. Their business model is based on economies of scale. For example, they can buy 20 bathtubs at one time, which ensures a lower unit cost. These economies of scale do not exist when building a single home.
How can I make sure I have the right amount of insurance?
Work with your agent to provide detailed information at the time of purchase to make sure you get an accurate and correct quote.
Ask us about additional coverage options that may be available.
Review your insurance to calculate the value regularly with your agent.
Tell your agent about any changes or improvements you make to your home.