How Do I Know I Have Enough Home Insurance?

These days it’s a bit confusing because home values have slipped considerably in many places. The key, though, is how much would it cost to replace your home if it were severely damaged or if it were burned to the ground?   Obviously, that value doesn’t refer to the purchase price because that included the land which in 99.9% of disasters is still there. The question involves the price of construction in your area.

Home values may have dropped. Has the price of home construction dipped, too?

The Insurance Information Institute recommends the following:

  • It’s a good idea to insure your home for the cost of rebuilding it. Check your homeowners’ policy to see the maximum amount your insurance company would pay if it had to be rebuilt.
  • Find out what it would cost to rebuild your home. Your insurance agent can calculate rebuilding costs for you or you can hire an appraiser (call me at 626-641-0346 for references). Make sure your insurance agent knows about all improvements you’ve made, such as a deck or larger kitchen.
  • Make sure the value of your policy is keeping up with increases in local building costs. Many policies include an inflation guard… if yours doesn’t, consider purchasing one.
  • Find out if you have a “replacement cost” policy for your house. If you own an older home, you may have a “modified replacement cost” policy.
  • For the contents of your home – find out whether you have “replacement cost” or “actual cash value” insurance.
  • Check the limits on certain personal possessions, such as jewelry. Consider buying an “endorsement” to insure valuables separately.

Insurance is one of these intangible products that we pay for and hope we never use. Make sure if you do need it, you have the coverage that you need.

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