Having homeowners insurance is an absolute must. That fact should come as no surprise—hopefully.
What is less intuitive is how much homeowners insurance you actually need. There are many factors that go into making such an estimate, and it often relies heavily upon how your home was built and what it contains.
The one thing you absolutely don’t want to do is insure your home for the value at which it was appraised. That cost only takes into consideration the resale value of the property, not how much it would take to rebuild from the ground up. And in the unfortunate event of a fire, that is exactly what would be needed.
We’ve compiled a list of some factors to consider when purchasing this homeowners insurance.
Size and Amenities of the Home
Homes come in all shapes, sizes, and varieties. Depending on what type of home you own, your insurance needs may be higher or lower. Statistically speaking, it is going to cost far less to replace a mobile home than it would a $10 million deluxe mansion.
However, the style and age of your home won’t be the only thing to take into account.
Let’s assume for a moment that you live in a four-bedroom, two-and-a-half bath, two-story home with a basement. You also just added a back deck and front porch that wraps around to the side. The home was custom designed during the build and you had ceramic tile installed in the kitchen and bathrooms, granite counter tops, hardwood flooring downstairs, and Berber carpet upstairs. The basement was finished and sectioned off to include a den, office, and game-room.
Sounds like a pretty awesome house, right?
But a tragic fire breaks out in the kitchen and while everyone thankfully got out safely, the entire home is rendered a loss. Your homeowners coverage was only enough to reflect the home’s appraisal price. Now you have to rebuild on the land, but without your deck, porch, ceramic tile, granite countertops, hardwood floors, and Berber carpeting.
Had you taken all of those items into account when purchasing your insurance, you’d be able to get your dream home back in a few months like nothing had happened. But now the house you can afford to rebuild may no longer feel like the home it once was. You have to ask yourself, “If I’m not insuring my home for the right amount, which part of the house would I not want back after a fire?”
Replacing Your Stuff
Not only would your home need to be rebuilt in the event of a catastrophe, but your valuables would need replaced as well.
In a previous blog, linked here, we discussed the importance of having your insurance policy reflect the value of the items found in your home. For all of the items you own—not just the really expensive ones—it is important to make sure you have their value covered in the event of a loss.
One of the best ways to do this is to create an itemized list. On this list you should break down your home, room by room, and list the items, their date of purchase, and their purchase value. The next thing to do is to have your insurance policy adjusted to reflect the replacement costs associated with each item. If you have a 32-inch TV in every bedroom of the house, and a 60-inch TV in the living room, but your insurance policy would only cover the cost to replace one of the 32-inch TVs—that wouldn’t do you much good, would it?
Other, more expensive, items that you own should be individually itemized on your insurance policy to ensure their overall cost replacement. Attempting to replace a $20,000 Rolex when you only have listed a generic watch doesn’t quite cover it.
How We Can Make It Easy
Here at Smallwood and Small, we have utilized a brilliant technological advancement in the way of determining insurance coverage needs. A company called Marshall Swift & Boeckh developed an innovative estimator that helps determine replacement cost data for properties. Not only will the software provide an estimate, but it is geographically sensitive to give the best estimate for your location.
For those living in the Eastern Panhandle of West Virginia, costs are going to be drastically different than those of, let’s say, San Francisco. The software takes this reality into account and determines the appropriate costs based on what local contractors would normally charge for labor and materials.
Getting the proper insurance coverage for your home shouldn’t be a stressful task. If you have questions or if you would like us to try out our handy estimator to determine your needs, contact us today! Smallwood & Small proudly represents the Erie Insurance Group. Erie is one of the only companies in the Eastern Panhandle that guarantees your home will be rebuilt—no matter what it costs. Call 304-263-3361 to talk to an agent at our Martinsburg office, or 304-229-7227 to reach our Inwood office. You can also visit our website for a quick quote.
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