Jacob Dybala February 13, 2014 No Comments

Homeowners Insurance and You

In today’s volatile real estate market, homeowners across Chicagoland and the Nation are asking themselves one vexing question:

Damaged Home“What is my home actually worth?”

While the appraised value of your home is certainly important as a seller, it can be way out of the ballpark for purposes of providing enough homeowners insurance coverage to rebuild your home after a disaster, according to Snyder Insurance’s Joe Snyder.

“Home insurance, when done correctly, should restore your financial position prior to the loss occurring. Nothing more and nothing less,” according to Snyder. “Your appraised value is only what the market will pay for your home, not what it will cost to rebuild it in the event of a total loss.”

It’s a common trap that far too many homeowners confront in the wake of a disaster like the tornadoes that ravaged Illinois in 2013.

“I have found that many times when customers come to us they’re considerably underinsured, because their home may only be covered for the amount they paid for it,” Snyder says. “Their shocked to discover that their policy does not cover the total cost to rebuild from the ground up, which can be thousands, maybe even hundreds of thousands of dollars more than the current market value of the home.”

Calculating Replacement Cost

Homeowners should first contact their insurer to see if their current level of coverage is enough to cover the total replacement cost of their home. Your dream home may have cost $250,000 to build in 1985, but in today’s market it could well be double that amount. If you’ve added a custom kitchen or additional rooms over the years, you should contact your homeowners insurance agent to make sure a proper replacement cost estimate was done.

If your coverage does falls short, Snyder says cover the true costs of a rebuild can be handled by simply adding a policy endorsement to your existing homeowners policy. Most companies offer replacement cost coverage from 20% to 100% above the dwelling limit, depending on the policy you purchase. Keep in mind, though, that some insurers require that you insure 100% of the replacement costs for the property, which is defined as the cost to replace the damaged property without a reduction for depreciation.

Are You Prepared for a Total Loss? Review Your Homeowners Insurance Policy

The worst can happen, and it pays to review your current homeowners insurance policy to see that you’re covered for everything surrounding the total loss of your home. If you’d like a personal review of your current policy, or would like to explore adding an endorsement, please contact Snyder Insurance at (630) 310-5368.