How To Pick The Right Amount Of Home Insurance

Insurance Blog

When selecting a home insurance policy, one factor that will have the biggest impact on your insurance premiums is the amount of coverage you have. It is the maximum amount your insurance company will pay out, and needs to cover complete replacement of the house in a worst case scenario. How can you make sure that you are purchasing not too much or too little insurance? Start by keeping these 3 factors in mind.

3. Estimating The Proper Repair Costs

No matter what you paid for your home, the cost to completely rebuild it can be different. When filling out those online forms with different insurance agencies for quotes, make sure to base the value of the home off how much it will cost to replace it rather than how much you paid for it.

You can use the appraisal from when you purchased the home to help determine how much the replacement cost is.  The appraisal will account for things such as construction costs at the time to rebuild a similar home in that same geographic area, and will separate the cost of the home from the cost of the land.

2. Adjusting For Inflation

Your appraisal will be very accurate if you recently purchased your home, but what about 10 or 20 years from now? You will need to adjust for inflation and how construction costs will become more expensive over the years.

You should evaluate your home insurance policy every 5 years, and adjust the replacement value of your home based on the rate of inflation. This will help ensure that you will have enough money to cover the cost of your home if it needs to be completely rebuilt years from now.

1. Anticipating Changes In Building Code

When your house was originally built, it was built to the building codes at the time of construction. If you end up having to rebuild your home, the new building codes will require you to go above and beyond what you already had.

Depending on what part of the country you live in, rebuilding your home could now require things such as additional insulation or fire sprinklers. According to the Builders Association of Minnesota, these new building codes could increase the cost of construction by an additional $20,000. By keeping up on building codes, you can factor these new requirements into your home's replacement cost to make sure your home insurance covers them.

Anticipating these 3 factors will help keep you from paying too much for your home insurance, but still give you enough coverage. To learn more, contact a company like Kerr Agency with any questions or concerns you might have.


4 November 2014