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Do you know if you have enough homeowners insurance?You’ve finally done it—you’ve signed an agreement to buy your dream home. But now you need some homeowners insurance. So, how much should you buy?For your most complete protection, your coverage must equal at least 80 percent of the actual cost of rebuilding your home. Even closer to the replacement cost (90 percent or more) is better. Unfortunately, some homeowners opt for saving money by insuring their residence for far less than its replacement value. While a total loss is unlikely, these homeowners are gambling more than they know. Unless a home is insured for at least 80 percent of its replacement value, the policyholder may be in for a rude surprise, particularly in the case of a partial loss. That’s because partial losses on underinsured homes are not paid in full. If you insure your home to less than 80 percent of its replacement value you will only be paid a portion of your loss, based on the amount of coverage you have. The chance of being underinsured also increases after you’ve owned your home for a number of years, and it has appreciated in value. While you may have insured your home for more than 80 percent of its value 10 year ago, rising inflation and appreciation may have pushed you below 80 percent. To protect you against the effects of inflation, you often can obtain an "inflation guard" endorsement, which automatically increases the amount of coverage on your home at regular intervals. Replacement cost coverage is not only a good idea for your home, but for your personal belongings as well. With a replacement cost endorsement, you will be reimbursed for the actual cost of any lost items, minus your deductible. As always, your best bet is to discuss your homeowners insurance with your independent insurance agent. Your agent can help you make sure you’re insuring your home for an amount that will result in a full insurance settlement.
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