How Much Insurance Do You Need?

What You Should Know About: 

The Right Coverage to Protect Your Investment in Your Home

If the worst happens to your home, are you protected?

Three things you should know:

  • A recent study by a national analytics firm showed that three out of five homes are underinsured.
  • Three coverage options are typically available to homeowners: Actual Cash Value, Replacement Cost Coverage and Guaranteed or Extended Replacement Cost Coverage.
  • Your homeowners insurance policy should include enough coverage to completely rebuild and furnish your home.

Are you covered?

A recent study by the national analytics firm CoreLogic warned that three out of five homes in the United States are underinsured by at least 20 percent. Let’s face it. The wrong time to find out the limits on your insurance policy are less than the cost to rebuild your home is after you’ve lost your home and need to rebuild.

When you buy a home, your mortgage lender requires you to purchase a Homeowners insurance policy with limits high enough to offset the loan amount. But as a homeowner, it is up to you to know whether that policy is enough to replace your home and its contents if you suffer a catastrophic loss, and to make sure the policy you choose “keeps up” with rising building costs.

If you are buying home – or if you already have a homeowners policy, but wonder if you have the right coverage - the right place to start is a conversation with your insurance company or agent.

At a minimum, you should find out which of these types of coverage is included with your Homeowners policy:

Actual Cash Value:
A policy that is limited to the current value of your home (dwelling coverage) and/or its contents (contents coverage), based on the cost to replace the structure and/or contents, minus depreciation, wear and tear, age and other factors.

Replacement Cost:
A policy that covers part, or all, of sudden increases in building costs that push the expense of rebuilding above the dollar limits of the Homeowners policy, up to a percentage established by the policy purchased by the policyholder.

Guaranteed Replacement Cost:
A policy that pays to rebuild a home as it was before it was destroyed by covered peril (wind, fire, hail, for example), regardless of policy limits.

These policy types are available for the home itself (dwelling or structure coverage) and for what’s contained inside it (contents coverage). And there are other policies and/or coverage options as well, like “Floaters” that help insure valuables like jewelry that travel with the owner, and “Endorsements” that alter the conditions of a policy to cover specialty items like fine art, collectibles and valuable antiques.

We’ve added a link here to a downloadable, printable brochure from our friends at the Insurance Information Institute, titled “Insurance for your house and personal possessions: how much do you need.” 

We encourage you to take a look and learn more about insurance coverage that can adapt as building, labor and material costs, home values and your own investments in your home grow.