Do You Have Enough Coverage to Rebuild Your Home?

Imagine how devastating it would be to lose your house in a fire… then imagine not being able to rebuild it completely because you didn’t have the correct amount of insurance coverage to rebuild your home.  While this sounds like a nightmare scenario, it could all-too-quickly become a reality for under-insured homeowners.

Selecting the right amount of coverage is the single most important decision when it comes to homeowners insurance. Without the proper amount of “insurance to value,” you may not have enough coverage to rebuild after a total loss. Below are some explanations and tips to help you make the right choice for your needs. (And remember, if you need help, we’re just a phone call away!)

coverage to rebuild your home

What is insurance to value?

Insurance to value is the relationship between your selected amount of coverage (which you’ll usually see listed as “Coverage A” or “Dwelling Coverage” on your policy declarations page) and the amount actually 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 value?

A home’s market value is based on many factors. It 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 value.

Why is reconstruction more expensive than new construction?

Developers usually build many homes at once which helps them to negotiate better pricing from various sub-contractors and vendors. For example, they may purchase 20 bathtubs at once to secure a lower unit cost. These advantages don’t exist when building a single home.

How can I make sure I have the correct amount of insurance?

The only way you can be sure that you have the correct amount of insurance coverage to rebuild your home is by talking to an insurance agent. Whether you’ve just bought a home or made a recent renovation, providing your agent with detailed information helps ensure that you receive a thorough and accurate quote. It also never hurts to ask your agent about additional coverage options since, even if you decide that you don’t want them, you’ll at least know what else is available.

If you live around the Brookfield or Danbury, CT area and want to learn about homeowners insurance, be sure to give us a call today at (203) 775-2564 (because who knows what can happen tomorrow!)

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