One of the first and most important things a homeowner must do is to figure out how much homeowners insurance they need. This begins by selecting the maximum amount required for the type of coverage called Coverage A. Specifically; Coverage A refers to the amount the insurance company will pay to repair or rebuild your home if it gets damaged by a covered hazard. Different parts of your homeowner’s insurance policy cover your home contents, protect you from liability claims, and so on.
Estimating Rebuilding Costs for Homeowners Insurance
At Gutman Insurance in Manitowoc, Wi, clients frequently confuse the replacement cost of their house with its market value. Market value refers to the amount of money that you could expect to sell your house for. You typically estimate that by looking at the recent sales prices of similar houses in your area. You should know that the amount it would cost to rebuild your home on your lot will rarely be the same as the amount you could sell your house for.
Instead of figuring out how much your house and lot are worth to a buyer, you need to figure out how much you would need to pay contractors to clear out damage and rebuild your home on your own lot. Depending on property values, construction costs, and other factors, rebuilding costs could either be considerably higher or lower than its market value.
Let an Insurance Agent Help You Estimate Rebuilding Costs
To learn your home’s market value, you can visit a real estate agent. To learn how much it would cost to build an entirely new home on a clean lot, you can get estimates from construction companies. However, to estimate rebuilding costs, you should speak with a homeowners insurance agent. Insurance professionals will have tools that factor in local rebuilding costs and typical steps needed to repair or rebuild homes.
Very often, insurance companies supply software that they have specifically had designed to help their customers and their agents. An experienced homeowners insurance agent in Manitowoc will also use his experience with the area to help ensure that you have the right kind and amount of protection.
Even if you already have homeowners insurance and have lived in your home for years, you should revisit the maximum replacement value of your home that you have specified in your policy from time to time. As time passes, construction costs, property values, and many other factors are likely to change.
Types of Coverage for Rebuilding a Damaged Home
It’s very likely that your agent will suggest that you purchase a policy that includes guaranteed replacement value protection. This helps ensure that you can get your home rebuilt to your satisfaction even if costs increase because of inflation or other factors. If you only get covered for the basic replacement cost, you will be limited by the amount stated in your policy. Even worse, a policy that only covers your home at its cash value will subtract depreciation. Even though some parts of your home may lose cash value as they age, you should expect to replace them with entirely new construction.