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When you insure your home, you should insure your home for the
total amount it would cost to rebuild your home if it were destroyed. If you
don't have sufficient insurance, your insurance company may only pay a portion
of the cost of replacing or repairing damaged items.
There are three ways to insure the structure of your home:
1.
Replacement Cost: Insurance that pays the policyholder the cost of
replacing the damaged property without deduction for depreciation, but limited
to a maximum dollar amount.
2.
Guaranteed Replacement Cost: Insurance that pays the full cost of
replacing damaged property, without a deduction for depreciation and without a
dollar limit. This coverage is not available in all states and some companies
limit the coverage to 120 percent of the cost of rebuilding your home. This
gives you protection against such things as a sudden increase in construction
costs due to a shortage of building materials.
3.
Actual Cash Value: Insurance under which the policyholder receives
an amount equal to the replacement value of damaged property minus an allowance
for depreciation. Unless a homeowners policy specifies that property is covered
for its replacement value, the coverage is for actual cash value.
For a quick estimate of the amount to rebuild your home, multiply
the local building costs per square foot by the total square footage of your
house. To find out the building rates in your area, consult your local builders
association or real estate appraiser.
Factors that will determine the cost to rebuild your home:
- local
construction costs
- the
square footage of the structure
- the
type of exterior wall construction -- frame, masonry (brick or stone) or
veneer
- the
style of the house (ranch, colonial)
- the
number of bathrooms and other rooms
- the
type of roof
- attached
garages, fireplaces, exterior trim and other special features like arched
windows.
Also be sure to
check the value of your insurance policy against rising local building costs
each year. Ask your insurance agent or company representative about adding an
"INFLATION GUARD CLAUSE" to your policy. This automatically adjusts
the dwelling limit when you renew your policy to reflect current construction
costs in your area. Also, be sure to increase the limit of your policy if you
make improvements or additions to your house. |
