Do You Have Enough Coverage to Rebuild your Home?
4/26/2017 2:31 PM
Do You Have Enough Coverage to
Rebuild Your Home?
Imagine how devastating it would be to lose your home in
a fire. Now imagine not being able to rebuild it completely because you didn’t
have the correct amount of insurance.
Selecting the proper amount of coverage is the single
most important decision you can make with your Homeowners policy. Without it,
you may not have enough coverage to rebuild after a total loss. This is called
“insurance to value.” Below are some explanations and tips to help you make the
right choices for your needs — and remember, if you need help, we’re just a
phone call away!
What is insurance to value?
Insurance to value is the relationship between the amount
of coverage selected (typically listed as “Coverage A” or “Dwelling Coverage”
on your policy declarations page) and the amount required to rebuild your
home. Insuring your home for anything
less than 100% insurance to value could mean you wouldn’t have enough coverage
to replace your home in the event of a total loss
Why is the cost to rebuild different from the market
A home’s market value reflects current economic
conditions, taxes, school districts, the value of the land and location, and
other factors unrelated to construction cost.
The cost to rebuild your home is based only on the cost of materials and
labor in your area. It is important that
you insure your home based on its reconstruction cost, NOT its current market
Why is reconstruction more expensive than new
New-home builders typically build many homes at once, and
solicit bids from various sub-contractors to receive the best pricing. Their
business model is based on economies of scale. For example, they may purchase
20 bathtubs at once, securing a lower unit cost. These economies of scale don’t
exist when building a single home.
How can I make
sure I have the correct amount of insurance?
Work with your agent to provide detailed information at
time of purchase to be sure that you receive a thorough and accurate quote.
Ask Merit Insurance Group about additional coverage
options that may be available.
Review your insurance to value calculation on a regular
basis with your agent.
Tell your agent about any changes or improvements that
you make to your home.
Contact our office with any questions you may have