Insurance For your Home Part I
If your house is destroyed by a catastrophe or if your possessions are stolen from your home, you don’t want to suddenly find out that the home owners insurance policy that you purchased pays less than you thought it would.
To avoid being underinsured, you should consider the following tips.
If you already have homeowners insurance, speak with your agent or company to make sure you have enough. Most insurance companies recommend that you insure your home for 100% of the cost of rebuilding the home. Very few homes are totally destroyed but yours could be one of those homes that is totally destroyed. If your home is insured for less than 100% of the rebuilding cost, you have assumed the risk of not having enough money to replace it with one of similar size and quality. In addition, in a rising real estate market, the cost of rebuilding your home may be outstripped during the time of the catastrophe and the time it takes to actually begin and complete construction. Make sure your agent knows about any improvements, or additions to your home since you last obtained your insurance policy. If you do not regularly increase your limits to cover the cost of rebuilding, the additions or improvements you have made to your home may not be able to be rebuilt in the event of a catastrophe.
To assess your cost of rebuilding have an appraisal done.
The amount of insurance you buy should be based on actual rebuilding costs not the market price of your home. Market prices of homes fluctuate both up and down and at any particular time your home is damage it may be higher or lower than the original purchase price. However, the cost of rebuilding your house rarely goes down as generally speaking wages, materials and other costs tend to rise over time with inflation. You can contact an appraiser through recommendations from your local real estate agent, insurance agent or by consulting the phone book. The true cost of rebuilding your house is based on local construction costs, the type and size of house you own, including the level of construction, the style and amenities. For instance, if your home is a solid brick exterior, it would obviously cost more than one that has vinyl siding. So to insure that you have adequate insurance get an appraisal of the rebuilding costs. Some insurance companies offer a service which calculates the approximate cost of rebuilding which can also serve as an aid in selecting the amount of coverage to rebuild your home.
Purchase riders that increase your coverage to keep up with local building cost inflation. If the limits of your policy haven’t changed since you bought your home, then you’re probably underinsured. Many insurance companies offer an “inflation guard clause” that automatically adjusts the dwelling limit when you renew your policy to reflect the current constructions costs in the local area.