There are a few pieces of information every homeowner should know in order to protect their largest asset. As an insurance professional my biggest piece of advice is to understand how your home is insured and then to make sure it is covered correctly.
Reconstruction cost calculators are the tools most insurance companies use in order to determine the amount it would take to rebuild your home. These calculators look at a variety of factors such as the square footage of the home, quality of building materials, attached structures, specialty lighting and windows, flooring and countertop materials, architectural fees, building permits and contractor profit. As a homeowner it is very important that you look over these reconstruction cost estimates when provided by your insurance agent to determine that everything in your home has been accurately accounted for and the correct grade of home is selected. An issue can arise when the homeowner or insurance agent is more concerned about keeping the premium low and fail to account for all of the home specifications. The insurance carrier will only pay the agreed amount (Dwelling Coverage A) in the event of a loss nothing more. Individuals can choose to insure their homes for 25 to 100% additional replacement cost to cover any additions or increases in cost but this will be reflected in the premium.
If you have recently remodeled your home, I recommend having a new assessment done in order to account for the upgrade in materials. This may increase or decrease your insurance premium depending on the type of alterations completed. Your insurance agent will then increase the value of your home on your policy ensuring in the event of a loss you will be covered for your investment. For example, say an individual purchases a new home and decided to tear up the vinyl flooring to replace it with hardwood. Now if there was a fire or flood that caused the flooring to be damaged which flooring you would want your insurance to replace? The hardwood flooring of course! This is an excellent reason to communicate with your insurance agent to re-evaluate as your home and life evolve.
One common misconception for homebuyers when purchasing a home is to think the insurance reconstruction cost of the home should match the purchase price of the home. This is not always the case because the purchase price of a home is dependent on a number of different factors such as cost of living, price of other homes in the area of similar standard, seller’s input and location of the land. The cost to reconstruct the home may be less than the purchase price because it is only taking into account what is necessary to rebuild your home regardless of the location value.
The final tip I would give to homebuyers is to look at the limits of personal property in your homeowner policy. Most of the time the personal property amount will be 50% of the dwelling amount (Coverage A) and may sound like more than enough to cover your personal belongings but within that amount there are specific limits for designated items. A few categories that have set limits are jewelry, electronics, camera equipment, firearms, musical equipment, artwork, silverware and furs. I recommend for your pricier possessions purchasing a personal articles policy. Personal article policies allow you to insure your high valued items at an agreed value and in the event of a loss you can reclaim the full amount.