Jan
18
How much homeowner’s coverage do I need?
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I understand that, in the worst case, my homeowner’s policy covers rebuilding of my house in case of fire, flood or any other desaster that would destroy it completely. I have been getting conflicting answers on how much coverage I need to be covered for that rebuilding. Is is the fair market value of the house? Is is the rebuilding cost? Is it the amount of my loan? I understand that the bank would like at least the amount of the loan covered, but do I truly need to be covered for the market value? The rebuilding cost will be lower. How do I determine that amount. Currenly, my insurance company, bumps that coverage amount every year, based on some Boeckh Publications Building Code Index that, I assume, show that the value of my house has increased. Thank you very much for anyone’s help.
Repossession
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3 Comments
September 8th, 2009 at 4:31 am
Depends on what you expect to get out of the insurance. If you have the minimum required by your lender, then it’s possible that you’ll be unable to rebuild your home (since you only covered the amount you owe the lender). This means you can lose the equity you may have accrued over the time you’ve owned the home.
Best policy is to be sure you have enough coverage to rebuild a home which can be sold for a value which is close to your current home (including equity). This may not be the same as rebuilding your house exactly as it stands today, since newly constructed homes usually sell for more.
September 10th, 2009 at 4:30 am
You should be covered for the amount of replacement cost, which is the cost of rebuilding in case of a total loss. You may need to get an appraisal. Replacement cost is calculated by square footage, and building materials, etc. You should call your agent to get an accurate quote.
This answer is based on Texas guidelines, answers may differ from state to state.
September 12th, 2009 at 12:54 am
Here is the best way to know how much coverage you need: Measure the square footage of your home. Length x Width x # of Floors. Then call 3 local general contractors and ask them how much per square foot they charge to build a house. Take the average of the three and multiply the dollar amount by your square footage. This gives you replacement cost. You’ll need about 15 to 20% more for removal of debris.