Insuring your home can be confusing, and knowing how much coverage to buy can be difficult to figure out. That’s where a qualified insurance agent can help you out.
There’s any number of numbers that can used to value a home, and they can all be accurate – for their intended purposes.
Purchase Price or Market Value – the price you paid for your home. Generally, your bank will want you carry at least this amount of coverage on your home. Purchase prices can vary widely based upon location, local economy, closeness to amenities and schools, etc. Purchase prices can be substantially below or above the amount you should use for insurance purposes.
Actual Cash Value – Rarely used any more, the actual cash value of a property uses the original cost to build the property and then reduces that amount for depreciation (the normal wear and tear).
Replacement Cost – Replacement cost is closer to the amount of coverage you want to insure your home for. Replacement cost calculates what it would cost to rebuild your home today, using modern materials.
Guaranteed Replacement Cost – Guaranteed replacement cost policies typically use the replacement cost of your home, but include wording that the insurance company will pay whatever it actually takes to replace your home – usually subject to a cap that is a percentage of the replacement cost (ie, they’ll pay whatever it takes, as long as it’s less than 150% of the insurance coverage purchased.)
Reproduction Cost is rarely used except for buildings that are custom built and/or of some historical value. Reproduction cost will pay to duplicate the original materials and workmanship used to build the home. Have hand blown stained glass windows? This valuation with pay to replace that window with hand blown stained glass, instead of modern materials.
Fortunately for our clients, we can do a quick survey of your home and use modern software to come up with the actual. current replacement cost of your home, which is what you want to insure your home for. Most insurance companies will automatically increase this amount a little every year to account for inflation. We recommend having a new survey done to come up with the actual replacement cost from time to time to make these adjustments haven’t gotten off track. If you have remodeled, built on, or substantially changed anything in your home you should also call us to recalculate your replacement cost.
About Trimble Insurance
Trimble Insurance is a family owned business spanning four generations. Serving the personal and commercial insurance needs of Delaware County and all of Central Ohio, Trimble Insurance is a leading independent agency. In addition to homeowners and auto insurance, Trimble insures businesses of all types and specializes in contractors, energy, bonds, manufacturing, auto related, distributors, farms and agribusiness, and other industries. www.trimbleins.com