Home Insurance Replacement Cost
When you are buying a homeowners insurance policy the first thing you look at and have to think about, and make a good decision on is, what is the value of your home. Now, I say you make a decision; once again, you should be guided by the insurance agency you are dealing with. What you don’t do, is use the purchase price of your home. Sometimes a mortgage company may mandate that you insure your home at least equal to the mortgage.
That may be something you don’t have a choice with, but maybe your house needs to be insured for more than that. I will say though, if your agent is in to it, like we are, and your mortgage company is requiring you to have a higher value than what you really need to insure your home for, it’s worth taking a shot at to see if the correct value can be established. So what does that mean, “correct value?” Again, you don’t base it on the purchase price.
What you base the value of a homeowners policy on is what it is going to take to rebuild your home if it goes flat to the ground – burns down, blows away in a hurricane, however it gets damaged you have to build it back. Market value, as we know right now, market value changes. What happens is that based on the characteristics of a home from square footage to the type of construction - brick, block, frame, the roof, the garage, all the different factors that go into a home. These questions are asked and put into a computer model. These models are designed by insurance companies and will help determine what that value needs to be to replace your home in today’s market, obviously with new materials.
It is even sensitive enough, this computer model, to know what the cost of building is in your very zip code. The amount that you determine is a professional and accurate way to go about determining the value for your home. Heads up, if you ever get into a situation where someone says, “how much is your house” or “how much did you buy it for” and they go with that. It really needs to start right there, with getting the value established with what it would take to rebuild your home if it went flat to the ground.
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