Does your homeowner policy have sufficient coverage limits to help you recover fully after a loss and avoid incurring serious financial burdens? It’s a question many people don’t ask, and if they have a claim, it can leave them with unexpected expenses.
It may be time to ask your independent insurance agent to review your policy. Agents have the software and knowledge to evaluate your risk, and you may find your risk is higher than you think. That’s because replacement cost can be affected by several factors that many people don’t consider.
- Rebuilding costs – Rebuilding a home is more expensive than building from scratch. Site accessibility, building codes and economies of scale all play a part. After a neighborhood of homes is established, removing debris and taking in heavy equipment can be more time-consuming and expensive because care must be taken not to damage neighboring property.
- Scarcity of resources – After natural disasters, the demand for labor and materials often exceeds supply, causing costs of both to increase.
- Age of the home – Homes built prior to 1945 typically have much higher reconstruction cost due to retrofitting of materials or requirements to bring systems up to code.
Your homeowner policy includes a coinsurance provision that requires you to insure your home for a specified percentage of its full value. If the limit of coverage on your home does not meet this requirement, your policy will not pay the full amount of the loss
Evaluate the kinds of insurance you need. Your agent can determine if you are adequately covered for events that are likely in your area, such as earthquake, flood and wind damage. Remember to ask if separate deductibles apply for these high-risk losses. Some policies require much higher deductibles for these events. If this is the case, create a plan to finance those deductibles should you need it.
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7 factors to help nail down your home’s reconstruction cost
1945: a key year in understanding home reconstruction costs
This loss control information is advisory only. The author assumes no responsibility for management or control of loss control activities. Not all exposures are identified in this article. Visit your local, independent agent for insurance coverage information and advice.