“How much home insurance should I buy?” It’s a common question. There’s several different ways to look at this.
If you want to insure for what is known as “replacement coverage,” you need to keep in mind several different things. The biggest thing is: “how much is it going to cost me to rebuild this home or this building if there’s a total loss?” Your insurance agent can help you determine that: what’s known as cost estimates for construction. What we take into account is square footage, features of the home, site locations, and there’s a couple other items that we take into account, but those are the largest ones. What you want to do is you want to work with your agent, give them as much information about the home as possible so they can come up with an idea of what it cost to rebuild this home if there’s a total loss, fire, tornado, whatever.
There’s some other ways to go about it, too. If you go with a policy known as “actual cash value,” you’re basically insuring for what the building’s actually worth and claims will be paid on a depreciated value. That is a less preferred way than replacement. Replacement is always the way to go if you can get that coverage. It’s a little bit more expensive usually, but it’s usually worth it, because there’s no depreciation involved when the claim time comes.
A common people mistake make when they’re insuring their home is they think the assessed value or what they purchased the home for. Those are completely different things. With the insurance, we’re concerned about what it cost to rebuild the home. The assessed value is basically a fair market value. What you purchased the home. It was the purchase price. Those are different things than what the reconstruction costs are and that’s what you want to go off of. A good agent should be able to help you develop the cost of what it would cost to rebuild that home if there’s a total loss.
If you have any questions about how much insurance you need for your home, certainly you can feel free to call us here at Philleo Agency.
