“How Much Should I Insure My Home For?”
· by Matt Fox · posted March 12, 2008
· filed under Homeowner, Personal Insurance category.
It depends on who you ask. If you ask your Realtor®, they may say you have to insure your home for the market value. If you ask your mortgage broker, they will say it has to be enough to cover your mortgage. If you ask your insurance agent, they’ll say your home insurance needs to cover the replacement cost of your home if it’s a total loss.
You don’t need to insure your home for the market value because it’s just not necessary. The market value or appraisal value of your home is going to include the cost of land. Insurance companies don’t need to insure land. It doesn’t need to be replaced if your house burns down.
So how do you determine the replacement cost of your home? Insurance companies feed the construction details of your home into a replacement cost calculator. These details are the zip code, style, square footage, flooring, number of bathrooms, and other things. It also takes into account demolition, architectural, and other costs involved with rebuilding. In our office we use a third party cost estimator by one of the best companies in this business, Marshal & Swift.
Just like in the Three Bears, you don’t want to have a policy that’s too big and waste money. You definitely don’t want to have too little insurance on your home. You need to make sure your home insurance policy is just right.
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