The Details Here Help You Estimate How Much Home Insurance Coverage You May Need
Your home may be the biggest investment you'll ever make. If you're serious about protecting that investment, here's some important information to consider when determining how much home insurance coverage you need.
Insure Your Home for at Least 100% of Estimated Replacement Cost
To determine your amount of homeowners coverage:
1. Get an estimate of the replacement cost of your home.
2. Select the coverage amount that best fits your needs.
We recommend that you purchase an amount of coverage at least equal to the estimated replacement cost. But the choice is yours. Determining your home's estimated replacement cost is important because this will ultimately determine which optional coverages are available to you. Since it is impossible to predict today what the exact cost will be to replace your home in the future, it's important to have enough coverage to account for unforeseen circumstances.
Understand the Difference Between Market Value and Replacement Cost
Market value is the amount a buyer would pay for a home, including the land, regardless of how much it would cost to rebuild the home. Replacement cost is the rebuilding cost necessary to repair or replace the entire home. Replacement cost IS NOT:
- The market value of the home
- The home's purchase price or the cost of the land
- The outstanding amount of any mortgage loan
When Buying a New Home, Be Sure to Obtain a Replacement Cost Estimate
Before you purchase a new home, make sure that you determine the appropriate amount of coverage needed. Here's how:
1. Ask if a replacement cost estimate is available when you have the home appraised.
2. Or, consult with your local builder or building association or a reputable builder for an estimate.
3. You can also check with your State Farm® agent to help you with this process.
Be aware of any architectural details or unique building materials that may affect your estimated replacement cost, such as:
- Upgraded bathrooms or kitchen (including cabinets)
- Finished or partially finished basement
- Additional rooms or living space
- Custom moulding or arched windows
- Other unique features
A contractor or appraiser can help estimate your home's replacement cost
Building contractors or professional replacement cost appraisers are a good source for obtaining an estimated replacement cost of your home. Estimates from these sources should reflect your home's features, like those mentioned above. If you are unable to obtain a detailed estimate from these sources, your State Farm agent can discuss other options for estimating the replacement cost of your home.
Review Your Home Insurance Coverage Annually
Are You Well Protected Against Water Damage?
In today's world we see climate change bringing about heavier rainfall and snowfall and more frequent ice storms—all of which can pose serious risks to your property. To make sure your home is protected in the event of damage, State Farm has developed H2O+ Protection. This is a range of water damage coverages you can add to your home insurance policy for even more peace of mind:
- Water damage - Ground water and sewer back-up (Endorsement 16c)
- New! Flood caused by the overflow of a body of water (Endorsement 16d)
- Water damage - Above ground water and weight of ice and snow (Endorsement 42)
Have You Recently Remodelled or Improved Your Home?
When you upgrade or improve your home, you may increase your home's estimated replacement cost. Your State Farm agent will then help you adjust your policy to meet your coverage needs. As part of your policy's provisions, you have to notify us of any remodelling or additions to your home that increases its replacement cost.
Has the Rate of Inflation Risen Since Your Last Appraisal?
We provide home insurance coverage that automatically adjusts each year in an effort to compensate for increases in construction costs in your area. However, certain conditions such as severe weather can increase the demand for labour and materials and raise costs beyond normal inflation. It's important to update your home insurance coverage amount each year to keep up with the changing economy.
What Influences Building Costs in Your Area?
Market conditions may affect what it would cost to rebuild your home if you experience a loss. Replacement cost estimates are influenced by supply of labour, demand for labour, and the cost of construction materials.
If you have any questions, contact your State Farm agent.
All coverages are subject to the terms, provisions, exclusions, and conditions in the insurance policy.