Homeowners
Insurance
When
you insure your home, you should insure your home for the
total amount it would cost to rebuild your home if it were
destroyed. If you don't have sufficient insurance, your insurance
company may only pay a portion of the cost of replacing or
repairing damaged items.
There
are three ways to insure the structure of your home:
- Replacement
Cost: Insurance that pays the policyholder the cost
of replacing the damaged property without deduction for
depreciation, but limited to a maximum dollar amount.
- Guaranteed
Replacement Cost: Insurance that pays the full cost
of replacing damaged property, without a deduction for
depreciation and without a dollar limit. This coverage
is not available in all states and some companies limit
the coverage to 120 percent of the cost of rebuilding
your home. This gives you protection against such things
as a sudden increase in construction costs due to a shortage
of building materials.
- Actual
Cash Value: Insurance under which the policyholder
receives an amount equal to the replacement value of damaged
property minus an allowance for depreciation. Unless a
homeowners policy specifies that property is covered for
its replacement value, the coverage is for actual cash
value.
For
a quick estimate of the amount to rebuild your home, multiply
the local building costs per square foot by the total square
footage of your house. To find out the building rates in your
area, consult your local builders association or real estate
appraiser.
Factors
that will determine the cost to rebuild your home:
- local
construction costs
- the
square footage of the structure
- the
type of exterior wall construction -- frame, masonry (brick
or stone) or veneer
- the
style of the house (ranch, colonial)
- the
number of bathrooms and other rooms
- the
type of roof
- attached
garages, fireplaces, exterior trim and other special features
like arched windows.
Also
be sure to check the value of your insurance policy against
rising local building costs each year. Ask your insurance
agent or company representative about adding an "INFLATION
GUARD CLAUSE" to your policy. This automatically adjusts the
dwelling limit when you renew your policy to reflect current
construction costs in your area. Also, be sure to increase
the limit of your policy if you make improvements or additions
to your house.
