Your Atlanta home is one of your greatest assets. A house is a big investment, but we know that it’s more than that. Your house is your home, your shelter. Sure, you might have the occasional maintenance issue, but you wouldn’t trade it for anything. And to protect your home, you need to make sure that you have the proper home insurance.
But that begs the question – how much home insurance do you need?
The answer depends on several things, but a lot of it comes down to how you choose to insure your home in the first place. You have different options. Let’s break it down into two parts – insuring the home itself (meaning the structure) and your personal belongings.
To make sure that you have enough insurance for your home, you need to check that you have enough coverage to handle rebuilding your home entirely if it were destroyed by a disaster like a fire. Now, the cost to rebuild your home includes the cost of the contractors’ labor and materials.
So, the options you have for insuring the home are to insure it for its market value or its replacement cost.
Market value is what someone would pay to buy your home, including the land that the home sits on.
The reconstruction value is the cost of rebuilding or repairing the entire home, including the construction costs that we mentioned earlier. As you can see, this is different than the market value, which only covers the cost of the home and land. This is also different than the price of only the land and the amount remaining on a mortgage.
Construction and materials are expensive, and they add more to the total cost of the rebuilding fiasco than you might initially anticipate. Insuring your home for its reconstruction value means that those costs will be covered without a problem. If you insure your home for its market value, you might end up with a much larger bill than you’d hoped.
How do I find out the reconstruction value of my house?
To figure out how much your home would cost to rebuild or replace, you need to consult a trustworthy builder. Find a builder that’s reputable to give you an estimate of what it would cost to rebuild your home, taking into account the materials it’s made of.
Will the reconstruction value ever change?
Okay, so here’s the thing – you need to let your agent know anytime you make a significant change to your home. These could be home improvements, like an addition or renovation. By renovating or doing home improvements, you could be altering the value of your home and thus how much home insurance you need. Even something that seems relatively small, like replacing your countertops for marble ones, warrants a call to your agent. You might be changing the value of your home enough to need to adjust your limits of coverage. Another time to consult with your agent is when you have a significant lifestyle change, like getting married.
It might be tempting to go with a lower premium for your home insurance, but it’s worth it to get robust insurance with plenty of coverage. Besides, there are other ways to lower your insurance premium while still keeping high levels of coverage.
When it comes to insuring your personal property, again, you have options. You can insure your belongings for their actual cash value or their replacement value.
Actual cash value means that your home insurance company will reimburse you for the price of the items at today’s value, minus your deductible.
Replacement cost value means that you get reimbursed for the full cost of replacing the items, minus your deductible.
That might not seem like a big difference. But it is. We recommend insuring your belongings for their replacement value because of depreciation. Basically, the value of your belongings might have gone down since you bought them, so the cost of replacing the item might be more than its current worth. With replacement cost, you’ll be able to replace the item with a new one without worrying about depreciation. With actual cash value, you might not get enough money to replace the item.
The easiest way to further explain is with an example.
Say that you bought a television a couple years ago. At the time it cost $4,000. It’s a nice one. Your home gets burgled and the thieves take off with your flat screen. The only thing is that the TV is only worth $3,000 today, but it’ll cost $4,100 to replace it with the same model and brand. Yikes. With replacement value insurance, you’d get the $4,100 (minus your deductible.) With actual cash value, you’d get $3,000 (minus your deductible.)
Now, depreciation depends on the type of possession and its age, of course, but things sometimes lose their value over time. You need to be prepared for that.
How do I know how much home insurance I need for my personal belongings?
Taking a home inventory is a great way to get an idea of the total amount of coverage you need. This will give you an idea of the value of all of your belongings.
Insuring Your Valuables:
Don’t forget about your expensive jewelry, silverware, furs, and antiques. You need to make sure that you have enough coverage for your jewelry and other valuables. They might exceed the limits on your home insurance policy, which means that you need to consider purchasing extra insurance for these items. You might need to get an extra floater or rider (basically an addition to your policy) to cover them.
To figure out just how much extra insurance you might need, you have to have your treasures appraised. That way you’ll find out what they’re worth in today’s market and know how much they need to be insured for. Remember, you’ll need to have these valuables appraised every couple years to take changing prices into account.
Remember, the name of the game is making sure that you have enough insurance to cover everything, including the home itself and its contents. Peace of mind is worth it.
Insuring your home might seem like a headache. There’s a lot to think about and a lot of factors at play. But we can help you make sure that you have the insurance you need to protect your home and your family. Just give us a call or fill out our quote form and we’ll help you create a customized insurance plan that will protect your family from whatever life might throw at you.