My home is worth 2x as much as when I bought it -- do I need to change my insurance?

Question

I saw a 'teaser' for a news program about this like a year ago, and it's been nagging at the back of my mind since then...

Are you generally insured for a specific amount (the appraisal at time of sale)? If I lost everything tomorrow and I got the full amount of what the structure appraised for at the time of sale, then I'd only be able to build a house half the size on my property in the current market. I really have no clue about all this...

Answer 1

I am an insurance agent. The type of policies that I work with have a benefit Incorporated in the policy that encompasses inflation protection, (a percentage of increase to your policy at your renewal to take into account rising prices of contracting and architectural fees as well as building materials). However has your houses value increased because external influences, such as land value, or new schools in your town? That is not taken into account for your coverage, so worry not!
In most cases the only reason why you would need to update your insurance policy is if you have made updates to your actual dwelling, not the land. This includes adding on an addition, renovating your kitchen, ripping up carpet and installing all hardwood, putting in a pool... If you ever had a total loss to your home as a result of a covered peril (like fire) most insurance companies will pay above and beyond your dwelling coverage amount to replace your home with like kind a quality (basically build it like it is) as long as you keep them updated with changes to your structure. This coverage is generally refered to as 100% replacement cost on Dwelling. You should definitely call your agent as all policies are different. Hope this Helps!

Answer 2

The amount would have been specified when you took out your insurance policy. In the event of a total loss you would only receive the amount on the policy. So, for instance, if you have a policy with limits of $100,000 and your house would cost $200,000 with today building costs to rebuild, you would only get the $ 100,000. Some companies throw in a little more coverage such as a rider that would give you an additional 25% which would allow for $125,000 in the example. They do this for building cost inflation, but like I said it depends on the company and policy.

I would check out raising you current limits. Just because you need 2x's the coverage doesn't mean it'll cost twice as much.

Answer 3

Likely not - if your house is currently written to the COST TO REBUILD. That's what insurance policies insure - cost to rebuild. Not the land, not the market value.

Appraisal is market value. It means squat. You will NEVER get an "appraised value". You get your policy limit, if the house is insured to full replacement value. If it's NOT fully insured, you get the percentage of the claim that you insured - example: Your house is insured to 50% of replacement value - you have a $25,000 kitchen fire. You get 50% of the claim - $12,500 - less deductible. Or rather, your MORTGAGE company gets it, against the loan.

You need a sit down with your agent to discuss this, and you need your agent to go out and see the house, and do a "cost estimator".

Answer 4

I live in New York. When my parents purchased there home in 1976 it was valued around a little over 30K. In the 1980's we suffered a fire and due to the crap insurance my father purchased we were unable to recoup all our losses. When my business picked up a couple of years ago we went to AllState to get the maximum amount of insurance since our home was valued at that time close to $800K (today it is valued a little over a million.) Here is the problem. You cannot decide how much you want to insure your home for. The insurance company decides. It doesn't matter if your home with personal belongings is valued at over 5 million. They determine based on location (i.e., we are considered high risk for hurricanes so AllState won't even sure my parents home now), age of home, and a few other factors. Now you can get seperate insurance to cover your personal belongings. You need to go to your insurance agent (you can also call) and inquire what is the maximum allowable amount to insure your home. I hope this helps.

Answer 5

Many home insurance policies are automatically increased each renewal based on average appreciation in the area. If yours isn't, you could be in major trouble if you had a claim. Read the policy, but the most likely situation is that if you had a major loss, say a fire damaged part of your house but it wasn't totally destroyed, and you were insured for half the current value of the house, you'd get half of the amount of the loss - if it was totally destroyed, your maximum recovery might be the amount of your policy but not more.

One comment - your insurance agent is not doing their job very well if this has gone on for several years and they haven't brought it to your attention.

Take care of this ASAP!!!! Doubling the amount of your policy will most likely not double the cost of the policy or anywhere close to that.

Answer 6

Ok. If your home was totally destroyed today....what would it cost (in todays costs )to rebuild your home as it was before the Loss?

This is replacement cost. Most homeowners are figured on a replacement cost basis. If it cost you (todays costs) to rebuild for $200,000 and you have a policy limit now of $100,000 then you are are under insured and could be subject to a co-insurance penalty. If you had a total loss then you would only get $100,000 Plus your Contents . If you had a partial loss let's say $20,000 then you would only get 50% of the claim since you under insured the replacement cost value of your home by 50%. It is a Mathematical analogy...remember don't think of market value...think of "new for Old".

See your agent .. tell him your concerns.

Answer 7

Yes. Most policies have a clause requiring you to be "insured to value". That is usually around 80% of the value of your building (not the lot). If you do not insure to value you will be penalized should you suffer a loss. Ask an agent for details.

Answer 8

Read your policy...if you are not fully covered then the risk is your not there's.
You see, when you buy insurance you are transferring the risk of loss from you to them. In return, they charge you premiums.
The question is does this policy now offer you the protection you need.
I suggest you go to www.yourpropertypath.com click on the insurance section: click the top article, fill it out and click on the banner to get four to six agents make an offer in a competitive bid for you business.
No teasers, no advertising gimmicks, just four agents looking to win your business

and its free

Answer 9

in case you own your residing house unfastened and sparkling without loan then you definately might have the capacity to opt to no longer have components vendors coverage. in case you experience mushy with paying the cost of tearing the residing house down and rebuilding or basically advertising a "totaled" residing house for a extensive "loss" and determining to purchase yet another one, then you definately could desire to evaluate doing this. If even in the experience that your residing house represents plenty over your existence's paintings and components then i might propose which you definately have the coverage. despite in case you've got the money for to very genuinely initiate over i might advise it as a results of fact it is so inexpensive.

Answer 10

Depends on the policy. You should have an insurance checkup. Talk to your agent.