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Do You Have Enough Coverage to Rebuild Your Home/Rental Property?

Imagine how devastating it would be to lose your home/rental property in a fire*. Now imagine not being able to rebuild it completely because you didn’t have the correct amount of insurance.

Selecting the proper amount of coverage is the single most important decision you can make with your Homeowners and/or Landlord Protection policy. Without it, you may not have enough coverage to rebuild after a total loss. This is called “insurance to value.” Below are some explanations and tips to help you make the right choices for your needs — and remember, if you need help, we’re just a phone call and/or email away!

What is insurance to value?

Insurance to value is the relationship between the amount of coverage selected (typically listed as “Coverage A” or “Dwelling Coverage” on your policy declarations page) and the amount required to rebuild your home.  Insuring your home for anything less than 100% insurance to value could mean you wouldn’t have enough coverage to replace your home in the event of a total loss.

Why is the cost to rebuild different from the market value?

A home’s market value reflects current economic conditions, taxes, school districts, the value of the land and location, and other factors unrelated to construction cost.  The cost to rebuild your home is based only on the cost of materials and labor in your area.  It is important that you insure your home based on its reconstruction cost, NOT its current market value.  In some places these two values can be drastically different.

Why is reconstruction more expensive than new construction?

New-home builders typically build many homes at once, and solicit bids from various sub-contractors to receive the best pricing. Their business model is based on economies of scale. For example, they may purchase 20 bathtubs at once, securing a lower unit cost. These economies of scale don’t exist when building a single home.  Let alone a custom home if you have one.

How can I make sure I have the correct amount of insurance?

Give us a call.  We can walk you through the Replacement Cost Guide to make sure we have everything up to date.  Sometimes we find that there have been updates to your home that we were not made aware of that can increase your home’s replacement cost.  Maybe a new bathroom, new kitchen, and addition, a new deck, a detached garage, etc.  A lot of times people complete remodels on their home, and forget to adjust their insurance.  We can work with you to make sure this gets taken care of.

Feel free to ask us about additional coverage options that may be available.  Tell us about any changes or improvements that you make to your home to be sure we are all on the same page.

*Fire is NOT always covered by insurance policies.  Especially in California.  Be sure to review your policy very carefully, and give us a call to go over the policy in more detail.