When buying a home it can sometimes be a nerve racking experience because of all the decisions that you have to make all at once. Of these decisions, one of the most important is how much coverage do you need to adequately insure your home? Here are a few tips for you to consider to make sure you are insuring your home properly.
The first tip is understanding that your homeowner policy only covers the home and not the land. If your home burns down, your land will still be there to rebuild. So, in some cases you may be insuring your home for less that your mortgage amount. This is especially common when real estate values are high.
Right now the opposite is taking place in which the insurance values are substantially higher than what the mortgage values are for homes that especially have been purchased over the past 1-2 years. This is because the bottom has fallen out of the housing market and people are picking up deals all over the place.
Ironically, 4-5 years ago the values for homes in FL were at an all time high so people had their homes insured substantially higher than what new purchases are going for today. Why is this? It is mainly because the mortgage carriers what their customers to maintain a certain insurance coverage to loan value. Because the home values are so much lower today the mortgage carriers are not requiring as much coverage.
From an insurance companies perspective, we are only interested in the cost of what the home will cost for rebuilding purposes. These huge swings in values that have occurred over the years are primarily a real estate factors and are different than what the insurance companies use for determining how much coverage you need to insure your home for.
Your agent will assist you in helping you insure your home properly. All agents have cost estimators that will give the agent a clear understanding for how much you need to insure you home for. If you as the client don't feel comfortable with the coverage amount that the agent comes up with it is always open for further discussion. Most agents have a 20% swing from what the cost estimator states.
It is always better to have a little extra coverage as due to supply and demand issues. If there is wide spread destruction it may cost more than usual to replace your home. I hope this has been useful in helping you determine your coverage.