HOMEOWNERS INSURANCE: HOW MUCH IS ENOUGH?

You’ve bought your new home and your realtor or escrow agent has told you to call and set up your homeowners insurance. This is where I come in. How much homeowners insurance should you buy?

There are three ways to value a home: The market value, the tax value and the insured to value amount. The first value is market driven. You pay what the market will bear. This amount does not directly relate to how much insurance you should buy. The second value is the assessed amount your home and property is worth. I still don’t understand how that amount is arrived at, I just know it doesn’t have anything to do with how much insurance you should buy. That leads us to door number three, the insured to value amount. After all of the questions your insurance agent asks you and a few other considerations, this is the amount of homeowners insurance that should be bought. Sometimes it is an amount lower that your purchase price (don’t forget: land and views are not insured…..at least not through standard a homeowners policy), sometimes it is higher. Quick review: market price is not a consideration when valuing a home for insurance.

Along with the specific information you gave your agent regarding your home, factors that impact your home value and cost of insuring it are: rebuilding costs, demolition and debris removal, unusual materials or features, building code changes, rising construction costs and inflation. All that to say: it’s more than just adding up your square footage and time sing it by a cost per square foot. Not only are these concerns enough, the homeowners policy itself has different sections with values attached to each section. If the first value is wrong, they will all be wrong.

Again, this is where we step in and it is our pleasure to not only give a value to your wonderful new home, but to explain and make sure that you understand each one.

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