Home replacement cost is one of the most important factors to consider when you get home insurance. Having enough coverage will put your mind at rest knowing you’ll receive enough funds to rebuild your home after a sudden accident.
With property values rising, it’s essential to think about replacement costs. The amount in your policy will significantly matter if your house is severely damaged or destroyed from a natural event such as flooding, or accident.
WHAT IS YOUR HOME’S REPLACEMENT COST?
Home replacement cost, or replacement value, is the amount of money it will cost to replace it from the ground up. It is used to calculate the cost of rebuilding your house if devastated by fire, weather events, or other perils.
When choosing what to add to your plan, consider where you live - if you're in an area prone to extreme weather, you'll want to have extra protection.
If you have done any renovations or upgrades you need to let your insurer know. Renos can increase your replacement cost and monthly/yearly payments. An example of this would be if you were to add a swimming pool, which requires additional coverage.
Many policies break down your agreement into dwelling, detached structures (if applicable), and personal property.
REPLACEMENT COST VERSES GUARANTEED REPLACEMENT COST
REPLACEMENT COST: Most policies require you to have at least 80% of your rebuilding cost included in your agreement. This amount could be increased or decreased, but always speak with your insurer to confirm what is covered. Set the amount at a number you are financially comfortable with.
If you have a replacement value lower than 80%, most insurers will only pay a percentage of the damage. It would be the same replacement cost value percentage. So, if you have 75% replacement value, they would cover 75% of the claims costs.
GUARANTEED REPLACEMENT COST:
Guaranteed replacement cost provides additional protection above replacement value. It will pay for the replacement of your home without depreciation factored in. Even if the damage is more serious than your value limit, your insurer will fully replace your property and possessions.
For example, your home is insured at a guaranteed replacement cost of $300,000. Your home has significant damage in a storm. After evaluating the damage to your home it will cost $350,000 to replace. If you have a guaranteed replacement cost, the additional $50,000 will be covered.
Paying a little more for guaranteed replacement costs gives you peace of mind in knowing your home will be repaired, even if the costs exceed your coverage limit.
This is important because as property values increase, it becomes more difficult to estimate the costs accurately.
Replacement cost means damaged items and parts of your home will be repaired, if possible, or replaced with a new item of the same quality without depreciation. Guaranteed replacement cost means your home is covered for the full amount to replace your dwelling, even if it exceeds the replacement limits.
MARKET VALUE AND REPLACEMENT COST
Homeowners often mistake current market value and replacement costs - not what they can get on the real estate market. Market value also includes the land, while replacement cost does not.
For example, you may be able to sell it for $500,000, but it may only cost $250,000 to rebuild. You are only covered for the cost to rebuild.
Home replacement costs should not be taken lightly or simply estimated. Take time to evaluate your home and belongings.
TIPS FOR CALCULATING THE REPLACEMENT COST
Calculating replacement costs is important to understand the true value. There are four main ways to calculate the value of your home if you need to replace it :
1. Insurance company : Your insurer will calculate your replacement value based on the information they have.
2. Hire an appraiser : You can hire an appraiser to accurately assess your property.
3. Do it yourself : Use the common factors used to calculate your house replacement value by using a cost estimator.
4. Online replacement cost calculator : There are several cost calculators online that you can use to estimate the value.
HOW TO DETERMINE THE REPLACEMENT COST OF YOUR HOME
Here are five tips to calculate replacement costs and ensure you have adequate protection
• Maintain your belongings : Keeping a detailed home inventory ensures you have accurate records and it simplifies the claims process.
With property values rising, it’s essential to think about replacement costs. The amount in your policy will significantly matter if your house is severely damaged or destroyed from a natural event such as flooding, or accident.
WHAT IS YOUR HOME’S REPLACEMENT COST?
Home replacement cost, or replacement value, is the amount of money it will cost to replace it from the ground up. It is used to calculate the cost of rebuilding your house if devastated by fire, weather events, or other perils.
When choosing what to add to your plan, consider where you live - if you're in an area prone to extreme weather, you'll want to have extra protection.
If you have done any renovations or upgrades you need to let your insurer know. Renos can increase your replacement cost and monthly/yearly payments. An example of this would be if you were to add a swimming pool, which requires additional coverage.
Many policies break down your agreement into dwelling, detached structures (if applicable), and personal property.
REPLACEMENT COST VERSES GUARANTEED REPLACEMENT COST
REPLACEMENT COST: Most policies require you to have at least 80% of your rebuilding cost included in your agreement. This amount could be increased or decreased, but always speak with your insurer to confirm what is covered. Set the amount at a number you are financially comfortable with.
If you have a replacement value lower than 80%, most insurers will only pay a percentage of the damage. It would be the same replacement cost value percentage. So, if you have 75% replacement value, they would cover 75% of the claims costs.
GUARANTEED REPLACEMENT COST:
Guaranteed replacement cost provides additional protection above replacement value. It will pay for the replacement of your home without depreciation factored in. Even if the damage is more serious than your value limit, your insurer will fully replace your property and possessions.
For example, your home is insured at a guaranteed replacement cost of $300,000. Your home has significant damage in a storm. After evaluating the damage to your home it will cost $350,000 to replace. If you have a guaranteed replacement cost, the additional $50,000 will be covered.
Paying a little more for guaranteed replacement costs gives you peace of mind in knowing your home will be repaired, even if the costs exceed your coverage limit.
This is important because as property values increase, it becomes more difficult to estimate the costs accurately.
Replacement cost means damaged items and parts of your home will be repaired, if possible, or replaced with a new item of the same quality without depreciation. Guaranteed replacement cost means your home is covered for the full amount to replace your dwelling, even if it exceeds the replacement limits.
MARKET VALUE AND REPLACEMENT COST
Homeowners often mistake current market value and replacement costs - not what they can get on the real estate market. Market value also includes the land, while replacement cost does not.
For example, you may be able to sell it for $500,000, but it may only cost $250,000 to rebuild. You are only covered for the cost to rebuild.
Home replacement costs should not be taken lightly or simply estimated. Take time to evaluate your home and belongings.
TIPS FOR CALCULATING THE REPLACEMENT COST
Calculating replacement costs is important to understand the true value. There are four main ways to calculate the value of your home if you need to replace it :
1. Insurance company : Your insurer will calculate your replacement value based on the information they have.
2. Hire an appraiser : You can hire an appraiser to accurately assess your property.
3. Do it yourself : Use the common factors used to calculate your house replacement value by using a cost estimator.
4. Online replacement cost calculator : There are several cost calculators online that you can use to estimate the value.
HOW TO DETERMINE THE REPLACEMENT COST OF YOUR HOME
Here are five tips to calculate replacement costs and ensure you have adequate protection
• Maintain your belongings : Keeping a detailed home inventory ensures you have accurate records and it simplifies the claims process.
PRO TIP: Once a year take a video of your home and belongings/valuables. Jot down or film make, serial numbers or identifiers
• Factor in renovations : Factor in all work you do to upgrade your home.
• Don’t cut costs : Replacement value is not an area to mess with when trying to reduce your yearly costs.
• Consider getting an appraisal : When was the last time you got an estimate for your home?
• Assess home value upon renewal : Renewal is an ideal time to reassess your needs and ensure the value is accurate.
Your Insurance provider will help with any questions you may have about determining the appropriate level of insurance you need.
• Factor in renovations : Factor in all work you do to upgrade your home.
• Don’t cut costs : Replacement value is not an area to mess with when trying to reduce your yearly costs.
• Consider getting an appraisal : When was the last time you got an estimate for your home?
• Assess home value upon renewal : Renewal is an ideal time to reassess your needs and ensure the value is accurate.
Your Insurance provider will help with any questions you may have about determining the appropriate level of insurance you need.
