Home Insurance Articles
How To Have The Replacement Value Of A Homeowners Insurance Policy Adjusted
2010-07-27
Purchasing a home comes along with more costs than simply the purchase price of the home. The new homeowner's first assignment after the purchase is to gather home insurance quotes and purchase homeowners insurance that covers the full replacement value of the home in the event of an unforeseen disaster. The home is a huge investment, and as such, must be protected as a priority. Evaluating the risk of being underinsured versus the costs of homeowners insurance requires the homeowner to consider whether he or she can pull from other means to replace the value of a home that is significantly damaged or destroyed.
During the initial purchase of homeowners insurance, the home insurance quotes gathered should reflect the cost of a full home replacement. Over time, however, with changes and home improvements, including both structural and cosmetic improvements, the value of the home may fluctuate. It is very important for a homeowner to understand the difference between the market value of the home and the replacement cost of the home. Market value, an estimate that takes into account land value and how much a buyer might pay for that home if it were on the market, is different than what it would cost to replace that home in the event of a disaster. With any adjustments to the homeowners insurance policy, the agent will be looking for changes to the cost of home replacement rather than changes to the market value of the home.
The homeowner should obtain an estimate of the replacement cost of the home at the time of purchase. It is recommended that special attention be paid to any items in the home that may add to the replacement cost, including custom work, upgraded appliances, the presence of an attic or basement space, arched windows and other non-standard features. Factoring in all these features, the contractor can then issue an estimate of the replacement cost. This estimate should be reviewed again each time upgrades or improvements are made, and at a minimum of once annually, to ensure the home has adequate insurance coverage in the event a replacement is needed.
The insurance agent can assist when it comes time for a homeowners insurance policy adjustment. The homeowner must provide the agent with a list of all updates, improvements, additions or changes to the home since the last revision. The agent will then review all the submitted information and generate a quote for a revised insurance policy that reflects the adjustments made to the property. It is a worthwhile investment of time for a homeowner to go through this process at least once annually to ensure the home is covered for its full replacement value.