Is your home insured for its true value?
Is your home protected? Since your home may be the largest investment you have ever made, it is important to understand your home insurance options.
Here are some factors to keep in mind when choosing a policy:
Market price is the amount you pay for a home, including the land, no matter how much it would cost to rebuild the home. The sale price, or market value, is determined by factors such as age, size, physical condition and the location of the home.
Reimbursement cost is the cost required to replace or restore the entire home equal to its condition before the loss. Replacement cost does not refer to the market value of the home, the purchase price of the home, the cost of the land, the assessed value or the outstanding amount for any home loan.
What factors help determine the cost of repairing your home?
Extended replacement cost It generally pays to have your home repaired or rebuilt to its condition before the loss, even if the cost exceeds the insurance limit up to a ceiling amount. The maximum amount is an extra percentage, for example 25%, 50% or 100%, over the amount for which the home was insured.
Guaranteed compensation cost will pay to repair or rebuild your home to its original specifications regardless of the cost. There is no ceiling for the amount that the insurance company must pay.
How you can be at risk
Choosing the right home insurance can be just as important as choosing a home. When comparing policies, it is important to distinguish levels of compensation cost.
You bought your dream home for $ 2.5 million. The replacement cost is estimated at $ 2 million. Six months later, your home is destroyed by a forest fire. Entire neighborhoods are destroyed. Demand, the price of labor and the cost of building materials are rising, driving up the cost of rebuilding. The actual cost of rebuilding your home is $ 4 million. Depending on which insurance you have chosen and what coverage options are available, you can get the following for your claim minus your deductible.
- Local construction costs
- Square meter
- Year built
- Exterior walls / ceilings / moldings
- Style at home
- Number of bedrooms / bathrooms
- Improvements / renovations • Other unique features
- Mandatory upgrades of the building code
Comparisons of home coverage
The market value of your home
Basic replacement cost of 100% (insured amount for homeowners)
Extended replacement cost of 125%
Extended replacement cost of 150%
Guaranteed compensation cost (amount needed to rebuild)
Housing is often underinsured, which provides insufficient funds to rebuild to the same specifications. A big loss for your home is traumatic enough, but not being able to recoup the rebuilding costs can be devastating.
Talk to your Bold insurance adviser about your replacement cost, and make sure he or she is aware of any significant changes in your home. Home renovations can have a significant impact on your replacement cost estimate. Updating wiring or plumbing may qualify you for additional credit. Although we rely on experience and data to determine the right amount, circumstances may push the actual cost of rebuilding to higher than expected. This is another reason to choose the guaranteed compensation cost.
Each claim is handled on the basis of its individual facts and circumstances and in accordance with the policy language, including applicable exceptions, conditions and limitations. The insurance overview is for informational purposes only and does not replace or modify the definitions and information in individual insurance policies or declaration pages that are controlling. Terms and availability vary depending on the state and exceptions apply.
The content of this article comes from Nationwide Private Client, a Bolder Insurance partner.