Do You Have Enough Homeowners Insurance?

You never know if and when something will happen — whether it’s a big catastrophe or something less destructive – so you need to be prepared!

It’s essential to choose the right insurance company, the right price, and the right coverage for your specific situation.  

Keep in mind, homeowners insurance is really a collection of different kinds of coverage such as fire, theft, liability, and windstorm wrapped up into a single policy.

Whether you’re a current homeowner who may need to upgrade your coverage or a potential new buyer who is purchasing home insurance for the first time, review these steps so you have the right coverage for YOU:

How Do You Determine Coverage?

Your coverage should be based on the square footage of your home, but it must also factor in how much it will cost per square foot to rebuild in case of disaster.   

Your insurance company will most likely require you to purchase coverage that insures 80% of the replacement value of the home.

Avoid the temptation to only get coverage for the purchase price or market value of your home.  Your insurance purchase should not be a matter of how much your home is worth, but what it would take to rebuild.  

Be sure to take into consideration everything that you have inside the home, which will also need to be replaced in the event of a disaster.

Do You Have Enough Coverage?

Get current information about what your home is worth today, and how much it would cost to rebuild it.  Replacement Cost is the price to rebuild your home in today’s dollars in the event of a total loss.   There are many factors that play into replacement costs such as:

Labor & Materials:  The cost of actual materials and labor are likely to vary from area to area, and material cost can rise or fall based on the general economic conditions.  For instance, after the Pandemic of 2020, lumber prices skyrocketed because of factory shutdowns, and supply chain issues. which made the cost of building much more expensive than it previously was.

Contractor’s overhead and profit: Obviously contractors need to charge for the materials and labor as well as overhead costs to keep their business running.  If there is a major disaster, and the insurance company is asking the builder to stop construction on all other projects to concentrate exclusively on your home, they will likely take that into consideration, as it will come as a cost to the contractor. So you may be paying a higher price to the contractor for expediency. 

Older/historic homes: Re-creating a victorian style home built in 1890 using “like kind and quality” materials may be incredibly expensive, or not feasible as the types of materials used 100 years ago, are no longer available.

Make sure that your deductible is set at a price that you can afford in the event that you must rebuild or do extensive repairs to your home.

If you’ve got a special art collection or a home office with equipment and supplies, you should be sure to let your agent know so that they can inform you about any additional riders that might be necessary.

What About Flood Insurance?

Being covered for the water damage from a flood in your basement is different than having flood insurance.  Talk to your insurance agent about the difference and make sure you’re covered if you end up with water in your basement, which is unfortunately very common in this area. 

Do You Need to Upgrade? For current homeowners, meet with your insurance agent to discuss what coverage you have now and let them know about any new home improvements or any new possessions that should be included in your policy. 

Your agent will come out and document these upgrades, take photographs, and let you know if you will need additional coverage.