A lot of people have the misconception that the Dwelling Coverage on your insurance policy reflects the Market Value of your home. For most insurance policies, this isn’t the case at all. The Dwelling Coverage is an estimate of the Replacement Cost for your home.
So what’s the difference?
REPLACEMENT COST is how much it would actually cost to rebuild your entire home. This factors in the cement, wood, drywall, contractors, roofs, furnaces, etc.
MARKET VALUE is what you could sell your house for. This value changes based on the current real estate climate.
HOW REPLACEMENT COST AFFECTS INSURANCE
• Dwelling Coverage (or Coverage A) is the highest amount the insurance company would pay to replace your home. This number is based on Replacement Cost and NOT Market Value
• While replacement cost varies widely around the United States, a rule of thumb is that a standard home should be insured for at least $125/square foot. The more custom your home is the higher this number will get.
WHAT IF YOU’RE UNDERINSURED?
• If your house burns down, the insurance company will only pay the amount of coverage even if that won’t rebuild your home.
• However, the best companies offer Extended Replacement Cost or Guaranteed Replacement Cost which creates an important buffer if it costs more to replace your home than you thought.
HOW DOES MARKET VALUE AFFECT YOUR INSURANCE?
• It really shouldn’t
Learn more about us at:
Our Site - www.shineinsurance.com
Our Blog - www.shineinsure.com/blog
Our Podcast - www.scratchentrepreneur.com
Our Course - www.newhomebuyersguide.net
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I see ya'll offer homeowner's and car but do ya'll offer Flood Insurance? Also are you only a local business or do you service the USA as I'm in FL and may be a silly question but hey if I don't know ...I ask! 1st time homebuyers soon to be here as we are house hunting and shopping around for insurance and possibly considering ya'll as I've loved all your videos as well as ya'lls heart and passion and seem like quality people with the heart of a teacher which is so appreciated and rare these days! :) So glad I randomly searched youtube for home buying process and insurance and discovered ya'll! You guys definitely stood out to me amongst all the other countless videos and research I've done so keep up the great work! Thanks!
Hey Rachel, So glad to hear that. We love making these videos and sharing a little bit of insight into the insurance world.
We're in Indiana and your best bet is to search for a local independent insurance agent. Check out a few web sites and then call an agency that looks solid. If you want to share what town you live in we can suggest a couple of the closest options that we know of.
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