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Whether you are buying homeowner’s insurance for the first time or reviewing your current level of coverage, it is crucial that you understand the value of your home.
Homeowner’s insurance policies impose limitations on the amount of coverage you can receive, with higher coverage amounts equating to a higher premium.
In order to understand the various coverage limits that are included within your policy, you must first know the value of your home and how your coverage and premiums are determined by your insurer. Furthermore, it is important for you to choose a level of dwelling coverage that will cover the replacement of your home rather than a cash value in order to ensure that you have the finances to replace your home should you ever experience a qualifying incident.
Generally, it is recommended that you hire a professional appraiser to evaluate the value of your home, especially if you do not agree with the value that your insurance agent quotes you. While an appraiser may be initially costly, it will be well worth the cost to ensure that you receive the full coverage amount of your claim. To learn more about how to assess the value of your home, the aspects that are considered, how to choose your level of coverage and how insurance providers will determine your premium amount, review the sections below.
When purchasing home insurance, your insurance agent will generally aid you in deciding how much dwelling coverage you need. It is recommended that you purchase coverage that is either equal to or greater than the full replacement cost of your home. It is worth knowing, however, that the replacement value of your home will not be equal to the market value of your home. This is due to the fact that market value also includes the price of the land itself.
It is crucial that you understand how your dwelling coverage limits affect your other coverage components such as personal property, other structures, loss of use, personal liability and medical payments. Typically, other structures on your property, such as a guesthouse, detached garage or shed will be limited to 10 percent of your overall dwelling coverage limit. That limit is than raised to 20 percent for loss of use coverage and 50 percent for personal property. No matter your dwelling coverage amount, you will be given the ability to select the amount of personal liability and medical payment coverage, which will then go on to affect your monthly premiums.
Most homeowner’s insurance agents will calculate the replacement value of your home using a cost estimator formula. This, among other factors like the home insurance coverage options you choose, will determine how expensive your insurance will be.
If you disagree with the amount that the insurance agency believes your home is worth in the event of a complete replacement, you can hire a professional appraisal to provide an estimate for the insurance agency. Most insurers will not provide an appraiser for you, so you may wish to have an appraisal done in order to ensure that you receive an accurate estimate.
While there is an average build price per square foot of your home, there are many other factors that you should ensure an agent is taking into account when assessing your home’s value, including:
Should you choose to hire a professional appraiser, he or she will give your home a thorough inspection. Most appraisers will also take video footage and photographs of your home and examine:
Once the appraiser has gathered all of the needed information about your home, she or he will be able to provide you with an estimated value after researching local market rates for the reconstruction and labor costs.
Not only does the insurer that you choose affect your premium amount, but there are a number of factors that will determine what you pay. Therefore, it is recommended that you shop around for the best price for the level of coverage that you need to fully insure the replacement of your home. However, be aware that no matter how your house is valued, there are certain home insurance limitations to what kinds of incidents companies will cover.
Other factors that will likely affect your insurance premiums include:
Additionally, other characteristics of your home, such as having smoke detectors, burglar alarms, deadbolts or other security devices may reduce your monthly premiums, as many insurance agencies offer discounts. Having a wood furnace, a wood stove, a swimming pool or a trampoline may raise your insurance due to the risk of injury.
It is important to review your homeowner’s insurance policy periodically in order to ensure that your coverage amount does not drop below the replacement of the home. If your coverage dips down below 80 percent, it is possible that your insurer may reduce the amount that it will pay on a claim. This can be the case after a home expansion or renovation. Additionally, if you acquire more personal property and the value exceeds the amount that is allotted to you, the homeowner’s insurance policy would than need to be adjusted.