If you are a home seller, you are no doubt aware of the significant increase in home values over the past seven years, if you are a homebuyer; perhaps this is not such great news for you. But if you have been happily living in your home with no intention of buying or selling, you may not realize that according to Zillow, the market value of homes in our area has increased by nearly 40% since 2012! While reconstruction costs differ considerably from market value, particularly for older homes, it is nonetheless important to periodically reassess the coverage you would need in the event that your home is damaged and you choose to re-build or destroyed and you elect to move on in today’s more expensive housing market.
The most important variable in your Homeowner’s Insurance policy is the replacement value— the estimated amount of money you would need to rebuild your house from the foundation up with materials of similar kind and quality.
According to Nationwide® about two of every three homes in America are underinsured by an average of 22% and up to 60% or more. Millions of these homeowners are at risk of a major financial loss should a disaster ever affect their home. Those that find themselves in this unfortunate situation could be responsible for tens of thousands of dollars of unexpected out-of-pocket costs – many would be financially unable to rebuild a house like the one they had prior to their loss. This is why it is critical that the amount of coverage you have is based on rebuilding costs, not the selling or purchase price of your house.
Another reason to adjust your home’s replacement value is to account for improvements that have increased the value of your home, such as a new kitchen, bath, deck or addition. According to one study, nearly 40% of homeowners who have significantly remodeled their home have not updated their homeowner’s policy. It is a good idea to contact us before or shortly after you begin renovations rather than waiting for the work to be completed to protect you against any possible mishaps during construction.
The second homeowners’ insurance variable to carefully consider is the total replacement value of your personal belongings. The current value of your possessions would not be enough to replace items lost. For example, the current value of a 5-year old TV is much less than the purchase of a new TV. Optional replacement cost coverage for your personal belongings ensures that you would have enough cash in hand to buy a new TV rather than a 5-year old one! Finding out how much coverage you need starts with taking an inventory of all of your home’s contents, room by room. Beyond approximating the cost of valuables such as electronics and art, remember to include furniture, clothing, appliances and home goods in your estimate.
The third element of coverage to consider is the cost of living elsewhere while your home is being rebuilt or repaired. In the event that you are not able to live in your home, what will be the cost of temporary housing and other day to day expenses outside of those you would have while living at home— think hotel nights and restaurant tabs. We can help you calculate an amount based on your family’s specific situation.
The final homeowners insurance variable to evaluate is personal liability protection should you be found responsible for a guest’s bodily injury while on your property. This is more difficult to calculate, and factors your long-term finances and net-worth. But we are here to help!