When selecting insurance coverage many insured’s find themselves a bit confused about what homeowners “replacement cost” coverage means. Replacement cost is the total cost to rebuild your home as it is now. This coverage takes into account construction techniques, labor and material prices, and your homes location. It’s very important to remember that your home’s replacement cost is not the same as it’s market value or your mortgage amount. The cost to completely rebuild your home today may be higher than what you could sell it for.
Replacement Cost Estimate
Market values fluctuate, labor and material prices can vary, and the cost of your home likely included the land it’s on. So, it’s important to remember that the cost to rebuild your home can be very different from your purchase price. Take into account the age of your home, as well as local rebuilding costs. Older homes may also be required to rebuild according to modern building code standards, which can increase costs. However, Farmers policies generally include an extra 10% above your reconstruction costs in anticipation of this! Our agents can run a “replacement cost estimate” to help you figure out what coverage you need.
Additionally, make sure to tell your agent if you’ve renovated, remodeled, or added any expensive materials or features to your home. It may cost more to replace or rebuild those features with new materials or specialized labor. If you increase your home’s value, then you need to increase your home insurance! An insurance coverage review can help to make sure your coverage is up to date!