How much homeowners insurance should I have?
When someone buys their first Naples home, there's always a question about how much insurance to buy. You would think the sales price would be the right figure, but real estate market value and home insurance replacement value are two different things. On top of that, the term "replacement value" has some misconceptions.
When picking the right insurable value for your home, consider the following:
- Simply asking for "Replacement Cost" does not guarantee that your coverage limit is sufficient to rebuild your home. There are rarely any guarantees in the insurance world.
- Make your best guess estimate of labor and material costs to rebuild your home today (or tomorrow), on that exact lot, given current market pricing.
- Then consider a slight demand surge on costs if prices increase due to labor and material shortages because of a large storm with widespread damage.
- Do not include the price of your land/lot value, home insurance does not cover the value of your land
- Real estate appraisals are not always the best source of
determining a home's inurable value. For a while, homes were selling at prices that were lower than actual costs to rebuild the same structure.
So how the heck are you supposed to make your best guess estimate of how much insurance to buy if you're not a building expert?
- The first, most obvious step would be to ask your insurance agent. At Harbour Insurance, we are able to provide replacement cost estimates using national and regional building cost averages and give you a ballpark figure. In fact, many times we are required to complete an estimate for your carrier anyway in order to justify the amount of coverage we're requesting on your policy.
- The second option is to consult a building professional for an estimate.
- Or, if you're really ambitious, you could complete your own replacement cost estimate here http://www.building-cost.net/CornersType.asp (for free) or use the industry standard Replacement Cost Valuation tool here http://www.accucoverage.com/Home.aspx ($7.95).
Disclaimer: This article is for informational use only. It's not our intent to suggest or provide legal advice and the author assumes no responsibility or liability for the actions taken or not taken by readers based upon such information.
How much homeowner insurance should I have? by Frank Scerbo Jr. CIC