Buying a home owner insurance policy can be an intimidating experience, especially if you have never done it before. There are many aspects of home owner’s insurance coverage you need to consider, as well as the overall cost of the policy. As you look over your options, it is critical to make sure you understand how to compare the market value of your home with the cost to rebuild. This can play a major role in the amount and type of home owner’s insurance you require.
What Do These Terms Mean?
The first step in understanding how much home owner’s insurance coverage you need is understanding the terms. The market value of your home, for instance, is the amount you would pay for your home under current market conditions. However, the cost to rebuild reflects how much it would cost to rebuild your home with the same quality, at the same size and in the same location. These two numbers are rarely the same. For example, consider two homes of identical size. One is located in a run-down area of the city, while the other is in an upscale suburb. Given that the construction of both homes is identical, the market value of the home in the city is going to be much lower than the value of the identical home located in the suburbs. Regardless of the market value, though, the cost to rebuild both homes is equal to each other. When comparing the amounts, the cost to rebuild the city home will be higher than the market value, while the cost to rebuild the suburban home may be less than or almost equal to the market value.
Which Should You Cover?
When you purchase your home owner insurance policy, you should have enough insurance to cover the cost to rebuild your home. This will ensure you can afford to build it as it was before your home was damaged or destroyed. Before you meet with your insurance agent to discuss your home owner’s insurance coverage, make a list of the number of rooms in your home, the overall square footage and any special features in your home, such as a builder’s upgrades or high-end appliances. This information will help your insurance agent accurately calculate the cost to rebuild your home. No one likes to think about losing their home to a fire or natural disaster. However, without the proper home owner’s insurance coverage, you may not have the money you need to rebuild. Buying a home owner insurance policy that covers the cost to restore your home can give you peace of mind knowing you can replace your home if something happens to it. If you do not have the proper amount of insurance coverage on your home, contact us. One of our specialists will help you determine if you need more coverage or if you have the right amount to rebuild your home if the worst should happen.