How much home insurance do you need to have?

 

The amount of homeowners insurance needed should be enough to cover:

The structure of the house.Its contents and personal belongings.The cost of additional expenses incurred in the event the home is damaged and they must reside elsewhere during repairs.To respond to civil liability with third parties.

Coverage of the structure of the house

You can say you have enough coverage if it is enough to rebuild your home at current construction costs, not including the value of the land. Do not base the price of rebuilding the home on what you paid for it, since the cost of rebuilding a home could be more or less than this.

Some banks require homeowners who have mortgages to obtain coverage for at least the value of the mortgage. If the amount of your coverage is based on the amount of your mortgage, still make sure that this protection will allow you to cover the costs of rebuilding it. If you've paid off your mortgage in full, don't eliminate homeowners insurance. This insurance will protect your home investment.

A quick way to find out how much insurance you need is to get the building price per square foot in your area and multiply that by the total square footage of your home. To get an idea of ​​the price of each square foot of construction in your area, you can contact a local real estate agent, a builders association or simply your insurance agent.

There are several factors that will determine the cost of rebuilding your home:

The construction costs of the area.Square footage of construction.The type of construction of the exterior walls of the house, such as wood or concrete frames, bricks or stone…The style of the house: if it is colonial, modern, etc.The number of rooms and bathrooms it has.The type of roof and materials used.That includes other structures such as garages adjacent to or detached from the main house, sheds, swimming pool, etc.If the house has a fireplace, basements, stone borders around the walls, and even decorative features such as arched windows.If the house, or at least part of it, was built to measure and taste or is made according to a common plan for many houses.If the house has improvements, additional constructions such as bathrooms or additional rooms, the kitchen has been expanded, etc.

Replacement of damaged structures

Most homeowners policies cover the cost of replacing affected structures. The type of policy called replacement cost of the property (replacement cost), will pay for the repair or replacement of the damaged property with materials of the same type and of the same quality as the existing ones, without reduction for the depreciation of the affected property. that is, without the replacement value being affected by age, use, condition or other factors.

Likewise, if you obtain flood coverage, it will be available on a replacement cost basis.

Guaranteed coverage and extended replacement cost coverage

In the event of a major disaster, such as a hurricane or tornado, often the demand for construction materials and labor to make repairs is greater than the supply and this can cause actual repair and replacement costs to be greater than the limits of the policies that homeowners have on their homes, leaving many homeowners not receiving enough money to cover the total construction costs.

To protect yourself from this risk, homeowners like you can purchase extended coverage that reimburses you beyond the policy limits. An extended replacement cost policy will pay as little as 20% above the policy limits if necessary, depending on the insurer.

You can also get a guaranteed replacement cost policy, which will pay any cost of replacing damaged property to the way it was before the disaster, fire, explosion, etc.

Building Codes and the Effect of Inflation

Since building codes are updated periodically, they can change substantially in the time you have lived in your home. If your home sustains extensive damage from a qualifying disaster and you rebuild or repair it, you may be required to implement these new building codes.

Replacement cost homeowners policies (including guaranteed and extended coverage policies) generally do not pay for the extra cost of building with the new code. Therefore, many insurers offer an extension or amendment to the policy that is known as an ordinance or law endorsement, or endorsement of laws and ordinances and that pays a specific amount of money for this type of cost (an endorsement is a document attached to the policy that changes your coverage).

Another important rider that you should consider adding to your homeowner's policy is inflation protection. This rider allows the policy to automatically adjust the personal property value limit with respect to annual inflation, for purposes of the policy's payment limits, each time you renew the policy and to reflect the construction costs applicable to your area.

How to insure older houses

If you own an older home, you may not be able to purchase a standard replacement cost policy, but instead must purchase a modified one. This means that instead of replacing the typical elements of an old house such as friezes, walls, wooden floors, etc., with similar materials, the policy will pay to replace them with construction materials and techniques used today.

There's a big difference in how insurers protect older homeowners. Some companies do not provide replacement cost coverage to recreate the quality and style of the home that had special additions such as moldings and reliefs on walls and floors, among others. There are insurers that cover older houses as long as they are in good condition.

If you can't get replacement cost for your home or choose not to use this type of coverage—in some cases the cost of replacing a large, old home is so high that you may not want to replace it with one of the same size—at least make sure Make sure your policy coverage limits are high enough to provide you with adequate funds to build a home of reasonable size and quality.

The contents of the home and your personal belongings

Most homeowners policies provide coverage for your personal belongings between 50% and 70% of the amount of money you have purchased maximum coverage for the structure of your home, known as the coverage of the dwelling of his house. Policy limits are generally listed on the Policy Declarations page under Section I, or Coverage A, of the structure.

To determine if this value provides enough coverage, you must take an inventory of your belongings inside the house. That is, make a detailed list of all your possessions with information regarding the replacement amount in case they are stolen or destroyed in an accident such as fire. If after taking your inventory you think you need more coverage than the standard, contact your insurance agent and ask them to quote you a higher price for your personal belongings.

Replacement cost or actual cash value coverage

You can choose to insure your belongings for their actual cash value, less a deduction for the item's depreciation, up to the maximum amount of your policy limits. Or you can choose replacement cost coverage for your insured possessions. In this second case, they will pay you the amount it costs to replace your possessions with similar ones, WITHOUT deductions for depreciation, up to a maximum stipulated in your contract.

Suppose a fire in your living room destroys the television you bought 10 years ago. If you have replacement cost coverage, the insurance company will pay you the price it costs to replace your TV with a new one. If you have real value coverage, they will give you a portion of the price of the new TV, because the one that was destroyed was 10 years old and the destroyed property had a lower real value than when it was new. One nice thing about cost replacement policies is that some can include the cost of delivering the new replacement product to your door.

In general, the price of policies with replacement coverages are usually a little more expensive than those of real value, they are approximately 10% more expensive. However, if you need to take property flood coverage it is only available as actual value coverage, never as replacement cost coverage.

 

How to Insure Expensive Items with Endorsements and Exhibits

In your regular policy you will find compensation limits to claim for certain expensive items such as jewelry, furs or tableware and cutlery. Generally, there is a limit of one thousand to two thousand ($1,000 - $2,000) dollars for jewelry coverage. Ask your agent or look for this description in the policy statement, under Section I, Personal Property, Special Limits of Coverage. For example, some insurers also have maximum coverage limits for certain items like computers.

If you find that these maximum coverage limits are too low, consider purchasing a special rider or endorsement to the standard policy. So you can secure additional items, either individually or in collections. Deductibles do not apply to these annexes. And the price of the rider to the policy will be in proportion to the value of the property (or collection) and its monetary value in the area where you live. You can also determine the value of items by showing the insurer receipts or invoices from recent purchases or by having them appraised by an expert appraiser.

Additional Housing Expenses After a Disaster

This portion of homeowners insurance is a very important feature and is found in most standard policies. This coverage pays for the cost of additional expenses incurred in the event the home is damaged by fire, hurricane, and other covered events and you must reside elsewhere during repairs. Includes payment of hotel bills, restaurants, and other expenses incurred by you while your home is being rebuilt.

The amount of coverage varies from company to company, but many policies include this protection up to 20% of your insurance coverage limit. Some companies even offer a policy that provides coverage of expenses without maximum limits, but for a limited time.

If you rent a part of your house, a room, the garage, etc., the additional expenses coverage will reimburse you for the rent that your tenant would have paid you in the event that your home had not been damaged.

Ask your agent exactly how much their policy coverage is on your case and if you think it is too low, you can get more coverage by purchasing an additional policy and paying a little more premium.

Civil liability towards third parties

This is the part of your policy that gives you protection against legal claims for personal or property damage suffered by third parties related to your home or the members who reside in it. It also covers damages caused by your pets, and pays both for the costs of defending you in court against the lawsuit, and for expenses the court finds you are responsible for.

As a general rule, most insurers include a limit of $100,000 liability coverage, but you may purchase amounts greater than this protection. It is increasingly important that you have higher liability coverage limits (between 300 and 500 thousand dollars).

Umbrella protection (umbrella) or excess liability coverage

You should seriously consider getting enough liability coverage to protect all of your possessions. If you own property, have investments, or have savings valued above your liability protection, you should consider getting more coverage through an umbrella or excess coverage policy.

Excess liability insurance policies provide additional coverage: They begin to pay once regular policies exhaust their limits, such as your auto or home insurance liability coverage. These coverages are not part of your home coverage, they must be purchased separately. Therefore, in addition to providing them with greater coverage, they can include broader protection than just your home. With these umbrella coverages, you receive protection against lawsuits for damages, invasion of privacy, defamation and slander, things that are generally not covered in any auto or homeowners policy.

The cost of an umbrella insurance policy will depend on how much insurance you have and how much risk you present. The more liability coverage you have, the cheaper they will be, because if you already have comprehensive liability coverage with your auto or home insurance, there's less chance you'll need additional coverage. Most insurance companies will require you to have a minimum of $300,000 of liability coverage, either through your home or vehicle insurance, if you own one.