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. |
