How To Determine Replacement Costs For Your Homeowner's Insurance

Insurance Blog

One of the most important steps to take when buying homeowner's insurance is making sure that your policy offers a coverage amount that is enough for the event that you would have to rebuild the entire house. To do this, you should make sure that the policy offers replacement cost coverage for the amount it would cost to rebuild the house if you lost it to a fire or some other type of covered peril. Here are three things to know that will help you determine the correct value to use for your coverage.

Do not base the amount on the amount you paid for the house

A lot of people make the mistake of choosing to insure their homes for the price they paid. For example, if you paid $250,000 for your home, you might assume that insuring it for this amount is enough, but it probably is not. While the amount you paid for the house is an important amount to consider as you purchase insurance, it is not the amount you should stick with when choosing the amount of coverage to have for your dwelling coverage on your homeowner's insurance policy.

Talk to builders in your area to find out the cost per square foot

One of the best ways to find out how much insurance to get is by finding out how much it would cost if you had to rebuild your home. If a fire ripped through your home leaving it so damaged that you had to rebuild, how much would it cost to rebuild it? A good way to determine this is by finding out the current rate per square foot for building a house. You can talk to local contractors to find this out, and you can then multiply this amount by the square footage you have in your home. This will give you a good idea as to how much insurance you should have for your dwelling coverage.

Update the amount every year or two

The other thing to know is that you should not assume that your house value will always remain the same, because it will not. Due to this fact, you should update your policy every year or two to reflect changes in value.

If you want to have peace of mind that you are fully protected, make sure you have enough homeowner's insurance to cover the cost of rebuilding your house. To learn more about the costs and types of coverages available, talk to a homeowner's insurance agent today.

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