When there’s a fire or another incident and your home is destroyed, all you can think about is what is lost. However, if you have a comprehensive home insurance policy, you may be able to gain a little confidence that your home can be rebuilt for you. However, if your home is damaged, it is possible that the costs of rebuilding can be very high. Before such an event happens to you, ensure your home’s current insurance policy is exactly what it should be.
Your Replacement Cost
The first step is to make sure your home has replacement cost coverage. It should be insured for at least 100 percent of the estimated replacement cost, which is not the actual cash value of your home. How do you know what this value is? Talk to your insurance agent or a local builder. Remember, this is not the value of your home as listed by a real estate agent or appraiser, but the value of rebuilding the home, which costs significantly more. Replacement cost is not the amount outstanding on your mortgage loan. It is not the amount you paid to build your home, buy your home or buy the land. And, it is not the market value of your home.
Coverage Beyond the Replacement Cost
Unforeseen costs do add up when building a home. It is impossible to know how much it will cost to rebuild your home, though. This is why many home insurance agents recommend having higher than 100 percent of the cost to rebuild your home in a policy. That will help to cover unforeseen events, such as code changes, unexpected high costs of materials or prolonged claim processes that drive up the costs.
Generally, you will need to work closely with an appraiser specializing in replacement cost or a contractor to learn what the true cost of rebuilding a home is after a significant event. Your home insurance policy is there to protect you, but it will have a limitation on how much you can claim. By adding to your limit now, you can safeguard your home from the many types of unexpected costs that can occur when it is time to rebuild.
Time to review your coverage? Call Auto Insurers of Virginia at (804) 379-2697 for more information on Midlothian home insurance.