We have been noticing when reviewing homeowners policies of insurance, that they seem to be falling short on the actual typical replacement costs in today’s inflationary market. With labor shortages and costs of goods being near all time highs, how confident are you it would be enough to rebuild your property to the standard you currently enjoy?

Building costs vary around the country. The Puget Sound area ranks among some of the highest in the country.

Below is an article from Moneygeek.com that explains how much coverage and what tyep you should consider. This is an excellent time to talk to your home owners insurer and possibly local contractors to find out what coverage you have as well as what you truly need should a disaster strike.


How Much Home Replacement Coverage (Dwelling Coverage) Do You Need?
MoneyGeek’s recommendation: Buy enough dwelling coverage to cover the cost of rebuilding your home.

Before you ask how much homeowners insurance you need, it is important to focus on how much dwelling coverage you need. You don’t need to insure the land your property is built on and you don’t need to insure it for the market value of the property, so your focus should be on the amount you need to completely rebuild your home in the event of a total loss. Given that you can buy a home in some cities for as little as $40,000 while other places might have little to nothing available under $500,000, the amount of insurance you need is based on your individual home.

How to Estimate Home Replacement Value
The only concern for your insurance company is the replacement cost of your property, which is what it would cost to replace your home if they are faced with a total loss. Typically, this is determined by using public data, market research and company-specific algorithms to find the amount of money you would need to completely rebuild your home.

Your insurance company can help you calculate rebuilding costs. Alternately, if you’re looking for independent advice, a professional home appraiser can be valuable in helping to determine the replacement value of your property.

Which Factors Impact Home Replacement Costs?
There are many factors that can impact your home’s replacement cost, including the age, size, shape and features of your property. This means that the height, square footage, building materials, roof slope, framing design, ceiling height, flooring type, heating and plumbing set up and many other features of your home all impact the total replacement cost.

What Is Extended and Guaranteed Replacement Cost?
We mentioned above that you purchase insurance based on the cost to rebuild your home, not the purchase price or the amount of your mortgage. This is correct, but it is important to remember that your replacement cost is based on an estimate. If the estimate isn’t completely accurate, or if things change over time, you might find that your total replacement cost isn’t enough to completely replace your dwelling.

Extended replacement coverage is an option offered by insurance companies that provides some amount (typically 25% or 50%) over the dollar amount of your insurance, in the event that replacing or rebuilding your dwelling costs more than anticipated. Guaranteed replacement cost goes a step further, guaranteeing to cover 100% of the total replacement cost, no matter how much higher the bill is than the insurance company originally anticipated.

What Is Inflation Guard Coverage?
Inflation guard coverage is an option that slowly increases the amount of dwelling coverage on your policy to account for inflation. This allows your coverage to stay current, preventing you from losing your house in a fire or a tornado only to find that your dwelling coverage levels are woefully inadequate.

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