September 07, 2015
What’s Enough Insurance Coverage For Your Home?
When it comes to insuring your home, how much is enough coverage? You may have insurance required for your mortgage, but will your homeowner’s policy cover your needs for every possibility?
Here are some things to consider when insuring one of your most valuable assets:
Insure For The Full Cost of Reconstruction When you think of the value of your home, you probably think about what it would sell for; however, when it comes to insuring your home, you should consider what it would cost to rebuild in the event of a loss – a number which is often much higher. Many mortgage companies require you to insure your home for at least 80% of its replacement cost, which may not be enough to cover replacing your home to its prior state.
The ITV (insurance to value) amount on your policy, also known as “dwelling coverage”, reflects the amount allotted to completely reconstruct your home. Your insurance professional can assist you with designating the appropriate dwelling coverage on your policy to ensure you could rebuild in the event of a total home loss.
Consider Extended Coverage In the event of a disaster, labor and building material costs may skyrocket, resulting in an even higher cost for reconstruction of your home. Even if you are insured for 100% coverage, this may result in a shortfall in the event of total loss. Extended dwelling coverage, which enables you to select 25%-50% of additional coverage, may help account for any unforeseen expenses that result from a total loss.
Complete a Home Inventory You spend a lot of time at home, and may think you have a strong grasp on what you own – but in the event of a loss, it may be harder than you think to recall every item and its particular attributes. Most people own more than they realize: furniture, appliances, clothing, sports equipment, and electronics are all considered “contents” on your homeowner’s policy. The easiest way to create an inventory is to take a video of the contents of your home, and describe each item as you go. You can also take photos to create a home inventory checklist. Some other tips for creating an inventory include:
- Add brand names and descriptions where you can, especially for high ticket items.
- Store your video or photo inventory offsite or online so you won’t lose it if your home is damaged.
- Keep any receipts you may have to make the claims process easier.
- Update your inventory whenever you purchase new home furnishings or valuables.
Compare the value of your belongings to your “contents” coverage on your policy. If you’re unsure if your coverage is sufficient, consult with your insurance professional.
Consider Equipment Breakdown Coverage Did you know that you can purchase insurance to cover critical household equipment? Equipment breakdown coverage may be a cost-effective way to replace household equipment, like appliances and heating and cooling systems, in the event they break. Standard homeowners policies typically do not cover household equipment, so this type of coverage may be worth looking into with your insurance professional.
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