A home is the largest investment you will probably ever make.

According to Nationwide, about two out of three American homes are underinsured. The underinsurance amount is typically 22%. This means that millions of people would suffer a major financial loss if their home was destroyed. Americans who find themselves in this predicament may have to pay thousands of dollars out of pocket to cover damages or may not be able to rebuild due to financial constraints. Don’t find yourself in this predicament.

 

The replacement cost of any item is the current price of replacing it with another item of the same kind and quality. The replacement cost of your home is the price of rebuilding it to its current specifications and standards if it is completely destroyed.  In this blog, replacement cost, replacement value, and rebuilding cost will be used interchangeably.  An accurate replacement cost allows you to obtain the right amount of insurance coverage. If you don’t have enough coverage and you have to replace your home you could be stuck with a hefty bill. Ask your insurance professional to help you decide on the reimbursement value and limits that are right for you.

 

You truly won’t know your replacement cost until it’s time to build, but there are some steps you can take to come up with an accurate estimate. The purpose of insurance is to make you whole again or put you back in the same type of house you had before the loss. To protect your budget from risk liability exposure, you should itemize, evaluate and determine the value of your home upgrades, materials, personal property and contents. You can start to get an idea of your liability by creating a home inventory. Make a note of the contents as well as the materials used to build your house. Think upgrades, collectibles, construction materials, electronics, clothing, furniture, appliances – everything. Your insurance agent can help you with this, but keep in mind, the accuracy of your replacement cost is only as accurate as the information you provide!

 

Information about your home that can determine your replacement cost:

• Type of foundation (crawlspace, basement, etc.).
• Type of construction (frame, masonry, masonry veneer, etc.).
• Roofing materials and type of roof (gabled, flat, hip, etc.).
• Siding materials and type of siding.
• Is the home built on a slope, and, if so, how steep is the slope?
• Total living area, in square feet.
• ZIP code.
• Number of stories and nonstandard wall heights, if any.
• Interior features and finishes, including walls, flooring and cabinetry.
• Age and type of heating and air-conditioning.
• Year built, and, if applicable, year when last renovated.
• Garage size and type (attached, built-in, etc.).

When do I need to update my insurance?

• You’ve renovated your home.
• You’ve invested in a security system or upgraded your security system.
• You recently purchased something of value.

 

The purpose of insurance is to protect you and your belongings and to help you out in a disaster. The mortgage lender’s interest is to protect their original investment, which is the outstanding loan on your home. Unless you have no mortgage, your home is insured as required by your lender. But there’s a good chance that the level of protection you chose in order to buy your house doesn’t adequately protect your liability risk exposure today. Your home insurance should cater both to the area that connects between these two interests: coverage to get your house structure rebuilt, and coverage to replace your belongings, rehouse you while they rebuild, and finally get your home back to the way it was before the event.

 

You might have more (or less) coverage than appears on your declarations page, so make sure to verify the policy with your insurance professional. Make sure to check the declarations page, which is on the first few pages before the contract language. It summarizes your homeowners coverage, and lists your coverage types and limits (the maximum amount the insurance company will pay to you in a covered loss). Also ask your insurance professional about ways you can close the liability gap and insure against loss.

 

If you have no insurance of your own to help with any of the above, visit Corrigan, a Division of Blue Ridge Risk Partners today to check ensure your coverage is adequate.