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Do You Have Enough Coverage for Your Home?

As many as two-thirds of American homeowners do not carry enough property insurance, according to industry studies.

The key is to purchase enough insurance to cover the cost of replacing your home. But arriving at that figure may not be easy.

Some people mistakenly believe they should buy insurance based on the purchase price of the home, or the current market value. But the cost of rebuilding your house may actually be higher than the price you initially paid for it, or, in a weak real estate market, you might not be able to sell your house for what it would cost to replace. Also, relying on your mortgage as the basis for buying insurance could be a mistake, especially if you made a large down payment because you may not recover enough to rebuild your house. Another major point to remember is that your homeowner’s insurance is designed to cover structures only, not the real estate. So, be wary of "appraisals" that might include the value of the land or the location.

Essentially, the cost of rebuilding your home should be based on local construction costs and the type of home you have. Rebuilding costs will vary depending on the style of house, the type of exterior construction (frame or brick), the number of rooms, the quality of the building materials used and any unique features.

At Avery Insurance, the recommendation is to insure for full replacement cost – meaning that the policyholder will be paid the cost of replacing the damaged property, essentially placing the homeowner back in the same position as before the loss. Your agent can help you calculate the coverage you need. This should include "Extended Dwelling Replacement Cost" to make sure that your insurance will be sufficient to cover a total loss now and in the future.

And don't forget your possessions inside your home. This is another area where homeowners often encounter difficulty – insuring their personal property. Most homeowners' insurance policies cover personal property for between 50 and 75 percent of the insurance amount on the house. On a home insured for $200,000 with 50 percent contents coverage, for example, the insurance company will pay up to $100,000 for losses or damage to furniture, appliances or other personal property.

Although that may sound like good coverage, it may, in fact, not be enough for families with computers and other electronic items, entertainment centers or expensive sports equipment. For a relatively minimal premium addition, you can increase your contents coverage to a level more in line with actual value. And, as with insurance for your home, you should also consider replacement cost protection for your personal belongings. For example, if a tree fell through your kitchen roof and destroyed your 15-year old stove, insurance would pay for a brand new stove if you had elected a replacement costs endorsement. Without this endorsement, a homeowner would be covered for only the actual cash value of the stove.

The agents at Avery Insurance suggest taking an inventory of all the personal belongings in your home. In fact, a videotape or photographs would also be helpful documentation of what you own.

If you have any questions about the adequacy of your insurance coverage, call an agent at Avery Insurance in Wolfeboro.